updated 7/13/2004 9:50:36 AM ET 2004-07-13T13:50:36

Bank of America said Tuesday it is buying bank-card processor National Processing of Louisville, Ky., in a $1.4 billion cash deal that would create the nation's second-largest such company with nearly $250 billion in annual processing volume.

Under the terms of the agreement, Bank of America will pay $26.60 per share for the publicly held company, which will be merged with its Bank of America Merchant Services business. The newly combined business will be headquartered in Louisville.

National Processing's merchant services business processes Visa and MasterCard transactions for some 700,000 merchants in North America. The company also provides financial settlement and reporting services to large and mid-size corporate customers in the travel and health care industries.

"This transaction will allow Bank of America to compete more effectively in the electronic payments business by creating immediate scale through National Processing's customer base and by using that company's technology platform to drive growth and improve servicing capabilities for both national and regional merchant clients," said G. Patrick Phillips, president of card services and electronic commerce at Bank of America.

The transaction is expected to be completed by the end of the year, subject to shareholder and regulatory approvals.

The deal was made with the support of National Processing's biggest shareholder, Cleveland-based National City Corp., which owns 83 percent of the company.

Bank of America also said Mark Pyke, now the chief operating officer of National Processing, will lead the combined merchant services business once the transaction is complete. Pyke will report to Phillips.

Jon L. Gorney, National Processing chairman, said his company decided to sell the merchant services business to better focus on its core banking business, including expansion in the Chicago region and acquisitions in St. Louis, Cincinnati and northern Ohio.

Bank of America holds nearly $1 trillion in assets and 35 has million consumer and small business customers.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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