Credit-card processor TSYS said Monday it has pulled the trigger on a $150.5-million deal that will partner it with First National Bank of Omaha to do even more business with merchants across North America.
The joint venture between Columbus-based TSYS, a global third-party processor, and the Omaha, Neb.-based bank, a subsidiary of the largest private banking firm in the U.S., will operate under the existing name of the bank’s processing division, First National Merchant Solutions LLC.
The transaction should be completed by April 1, the companies said.
The deal gives TSYS 51-percent control of the new company and a step up in what is known as the “merchant-acquiring” arena. The Omaha bank already is an acquirer, which means they sign up merchants, provide them with point-of-sale equipment, then process any transactions whenever they occur at a retail or other sales location where cards are used.
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TSYS’ existing merchant-processing subsidiary, Tempe, Ariz.-based TSYS Acquiring Solutions, only does the processing as a third party, said TSYS spokesman Cyle Mims. “They don’t manage that direct relationship with the merchant” like the acquirer does, he said. “The key for TSYS is our revenues increase on the merchant side by handling that direct relationship. We get a larger piece of the transaction dollar, so to speak, by being an acquirer, more so than just being a processor.”
TSYS Acquiring, which employs about 600 and has worked with the Omaha bank in the past, is not impacted by the new company, Mims said.
“Tempe will operate as they do today,” he said.
With the joint venture, TSYS becomes the 10th-largest player in the merchant-acquiring sector in North America, handling more than 300,000 merchant outlets and offering Visa- and MasterCard-branded prepaid cards for businesses small and large.
The move “positions TSYS as a full-service merchant acquirer for the first time in our company’s history,” Phil Tomlinson, TSYS chairman and chief executive officer, said in a statement.
First National Bank of Omaha, meanwhile, will control 49 percent of the new company. The agreement gives the financial institution access to TSYS’ sophisticated processing technology and services, while also providing a major financial boost from the purchase price.
Daniel O’Neill, president of First National Bank of Omaha, said the deal also “affirms” his company’s commitment to Omaha and its current management team, which it will retain.
“Partnering with TSYS allows us to gain technology and tools that will permit us to accelerate growth and enhance our capabilities to serve our growing customer base,” O’Neill said in a statement.
The Omaha bank is a subsidiary of First National of Nebraska. In its release Monday, the company reported more than $17 billion in assets and nearly 5,700 employees in 35 states, most in Nebraska, Colorado, Illinois, Iowa, Kansas, South Dakota and Texas. That contrasts with the “Business Overview” section on its Web site, which shows $20 billion in assets and 6,000 employees.
The bank’s merchant-processing division posted $74 billion in sales last year, with net revenue of $93 million. It has 475 on its payroll.
The joint venture comes with TSYS recently undergoing a downsizing in its work force, cutting 5 percent of its 7,600-person global staff, or about 400 positions. The company has said it expects earnings this year to drop 14 to 15 percent.
TSYS said management plans to discuss the Omaha venture in more detail during its first-quarter earnings conference call April 20.