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Fiserv to acquire CheckFree for $4.2 billion

Fiserv Inc., a provider of information management systems and services, is buying online banking company CheckFree Corp. for about $4.2 billion in cash, the companies said Thursday.
/ Source: The Associated Press

Fiserv Inc., a provider of information management systems and services, is buying online banking company CheckFree Corp. for about $4.2 billion in cash, the companies said Thursday.

Officials said there would be cost savings from combining the two companies which serve banks and other financial institutions, but did not say how many, if any, jobs will be shed.

The two companies employ a total of 27,000 people.

“Between now and the time we close, we’ll be working diligently to come to those right answers,” Fiserv Chief Executive Jeffery Yabuki said during a conference call with analysts and investors when asked for specifics about the synergies from the deal.

On an annualized basis, Fiserv said it expects to realize more than $100 million in cost savings and more than $125 million in extra revenue as a result of the deal. For 2008, the acquisition is expected to add to Fiserv’s underlying cash earnings per share, the company said.

The deal, set to close by year-end, is worth $4.22 billion based on the purchase price of $48 per share and the 87.9 million CheckFree shares outstanding as of April 30. The two sides value the deal at $4.4 billion, which includes an unspecified amount of debt, according to a spokeswoman.

Asked about the fate of employee jobs, Fiserv spokeswoman Melanie Tolley said the planned integration of the two companies will be reviewed over the next few months.

“We are definitely putting together some transition teams,” she said. “I think they’re going to have to look at every piece of the business.”

The combined company will have revenue of about $6 billion.

The $48 a share offer for CheckFree is a 30 percent premium over its closing price of $36.83 on Wednesday.

CheckFree shares rose $8.75, or 23.8 percent, to $45.58 in midday trading Thursday after rising to a new 52-week high of $46.10 earlier in the session. Fiserv shares rose 7 cents to $49.26.

Brookfield, Wis.-based Fiserv, which serves the financial and insurance industries, said CheckFree has complementary technology, services and business models. Norcross, Ga.-based CheckFree provides electronic billing and payment, online banking and investment management technology services, among others.

CheckFree Chairman and Chief Executive Pete Kight was asked during the analyst call whether he had any misgivings about selling the company he founded in 1981, and he was asked if the company could have gotten more.

“We have a lot of moving parts,” Kight said. “The market has a lot of moving parts. Perhaps the biggest issue I focus on, we really have a definition of stakeholder as shareholders, associates and the clients we serve.”

He added, “What we’re trying to do is balance out the best way to serve the stakeholders.”

Kight declined to say if there were any other bidders for his company. Executives said CheckFree and Fiserv had been in discussions for several months.

Yabuki said a goal of the acquisition is to “tightly integrate electronic bill payment and settlement capabilities with our core account processing and risk management solutions.”

He also said the two companies have complementary client bases. Fiserv’s core processing base consists of smaller and mid-market banks, credit unions and thrifts. CheckFree serves mostly larger banks.

Yabuki was asked whether any customers in the highly competitive online banking industry might be lost after the deal closes.

“We made a set of assumptions that we think are appropriate for the future,” he said. “I believe some institutions will go in-house and I think some institutions will end up outsourcing.”

Kight will be employed by the combined company and named to its board. The deal is subject to regulatory approval.