he U.S. Department of Justice (DOJ) and First Data Corp. reached a settlement over antitrust concerns raised by the DOJ regarding First Data's proposed acquisition of competitor Concord EFS, Inc, including Concord's STAR subsidiary-the largest PIN debit and ATM network in the United States. Pending Concord shareholder approval, the merger is expected to close in the first quarter of 2004.

Under terms of the agreement with the DOJ, First Data agreed to sell its 64% stake in the NYCE network-the third largest PIN debit and ATM network in the United States. The merger deal was also revalued at $6.9 billion, based on the closing price of First Data stock ($39.30) on Dec. 12, 2003. The acquisition was originally valued around $7.2 billion.

"The First Data takeover of Concord eliminates a strong competitor in the marketplace for merchant acquiring," said Bob Carr, Founder, Chairman and CEO of Heartland Payment Systems. "First Data will have a lock on the supermarket and petroleum retailing industries for the foreseeable future. ISOs and merchants will have one less alternative to serve their needs.

"This is good news for those companies that can compete effectively with the First Data model but is bad news for everybody else. I believe First Data will eventually become disappointed that it paid so much for the STAR debit network. Fewer and fewer banks are going to want to issue cards with the STAR bug now that it is controlled by FDC."

First Data said the combined company would have approximately $10 billion in annual revenues and more than 31,000 employees worldwide.

"This settlement is a victory for American businesses and consumers," R. Hewitt Pate, Assistant Attorney General in charge of the DOJ's Antitrust Division, said in a statement.

"The Division was prepared to show at trial that the acquisition, as originally proposed, would have caused merchants to pay higher prices for PIN debit transactions, which could have forced them to pass on those price increases to consumers.

"This settlement ensures that American businesses will pay competitive prices for PIN debit transactions and that consumers will benefit from that competition."

In April 2003, payment processing powerhouse First Data Corp. proposed a merger with its smaller competitor Concord, arguing that the acquisition would enable First Data to better compete with Visa and MasterCard's signature-based debit card networks.

First Data planned to combine the NYCE network with Concord's STAR network. By joining these two networks, the DOJ speculated that the combined companies would then have about 50% control of the market, and this could potentially reduce competition among PIN debit networks and increase prices for debit card transactions.

In October, the DOJ Antitrust Division and eight states and the District of Columbia filed a lawsuit seeking to block the deal.

To complete the transaction, First Data will issue approximately 175 million common shares to Concord shareholders. Upon completion of the transaction, Concord shareholders would own approximately 19% of the outstanding shares of the combined companies.

As a result of the settlement, the New York Stock Exchange (NYSE) advised First Data that it will not require it to obtain further shareholder approval under the NYSE's Shareholder Approval Policy in connection with the amendment to the merger agreement entered into with Concord EFS, Inc.

First Data shareholders already approved the original merger agreement on Oct. 28, 2003. To allow more time for Concord shareholders to vote on the deal, there is a new scheduled end date for the transaction, however; it was previously Jan. 31-it's now April 30.