t's official. First Data Corp., the largest processor of credit card transactions in the U.S., is buying smaller competitor Concord EFS, Inc. for roughly $7 billion in stock. When news of the deal broke on Tuesday, April 1, 2003, shares of Concord stock jumped nearly 28%, and First Data shares fell about 8%.

First Data Corp. and Concord EFS announced the news officially on Wednesday, April 2. Based on Tuesday's closing price of Concord stock, the transaction is valued at $13.87 for each common share of Concord, nearly a 17% premium over Concord's Tuesday closing price. First Data will exchange $0.40 of its common shares for every Concord EFS common share.

First Data said it will issue approximately 200 million common shares to Concord shareholders; when the transaction is complete, Concord shareholders will own approximately 21% of First Data. First Data estimates the combined company will have approximately $10 billion in annual revenues with more than 31,000 employees worldwide.

"Our transaction with Concord and its STAR network will enable First Data to provide its customers with more choices in products and services," First Data Chairman and Chief Executive Officer Charlie Fote said in a statement. "Access to our combined depth and scale will give banks and merchants an unprecedented voice in the introduction of innovative payment offerings to consumers."

Earlier in March, when a Bloomberg news story reported that Concord EFS was looking for a buyer, Concord's stock price fell more than 19% ("Concord EFS Stock Drops Amid Sale Rumors, Changes" The Green Sheet, March 24, 2003, issue 03:03:02). Investors showed concern that Concord might be having difficulty renewing major bank contracts for its STAR debit network (which expire at the end of 2003) and had put itself up for sale.

The New York Times reported on Tuesday that First Data became the leader in the acquisition talks when it outbid Automatic Data Processing, Inc., provider of paychecks and payroll services.

The acquisition is subject to shareholder and regulatory approval - if First Data acquires Concord, it will process close to two-thirds of retailers' ATM debit transactions in the U.S. The deal is expected to close in the third quarter 2003.