FDC-Concord Settlement Requires FDC to Sell NYCE

First Data Corp. and the Department of Justice this morning announced an agreement in which the government now gives the green light to FDC's acquisition of Concord EFS Inc. and in which the Denver-based processing giant agrees to sell its majority stake in the NYCE debit network. First Data now expects to close the merger, one of the largest on record this year, by the end of March 2004 on somewhat revised terms. First Data and Concord announced their $7 billion merger agreement last spring, but the Justice Department in October sued to stop it, fearing that it would stifle competition in the market for debit card transactions secured by personal identification numbers. Eight states along with the District of Columbia joined the suit as plaintiffs. Facing the start of trial today, the parties worked through the weekend to hammer out a settlement and revised terms for the merger. The consent decree setting forth the settlement now awaits approval by the court and the revised merger terms await approval by Concord shareholders. An FDC spokesperson this morning said it's unclear whether FDC shareholders need to ratify the new merger agreement. As part of the deal with Justice, FDC has eight months to divest its 64% interest in NYCE. This stake, along with Concord's control of the competing Star debit network, lay at the heart of the government's objection to the merger. In a conference call this morning, Charles Fote, chief executive of FDC, said the company expects to complete the sale sooner. First Data also agreed to maintain NYCE as a separate business unit pending the divestiture. “This settlement is a victory for American businesses and consumers,” R. Hewitt Pate, assistant attorney general in charge of Justice's antitrust division, said in a statement. Under the terms of a new merger agreement worked out in connection with the DOJ settlement, First Data will exchange 0.365 FDC common shares for each share of Concord, down from the originally proposed ratio of 0.40 FDC shares. At Friday's closing prices, this values the deal now at $6.9 billion. This will give Concord shareholders a 19% stake in FDC. FDC will issue about 175 million shares to Concord shareholders to complete the merger, which FDC says will result in cost savings of $205 million in 2006. The combined entity will have $10 billion in annual revenue and 31,000 employees around the world. The Department of Justice says it is satisfied the settlement resolves its objections to the merger as originally proposed. The basis of government's case was that the combined company would have been able to drive up the cost of PIN debit for merchants, who would have passed the incremental cost on to consumers. All eight states as well as the District of Columbia join in the consent decree, which will be published in the Federal Register for a 60-day comment period. At the end of the period, the court may enter the decree if it finds that “it serves the public interest,” the Justice Department says.