Fiserv to Acquire Electronic Bill Payment Firm CheckFree

MILWAUKEE _ Fiserv Inc. said Thursday it plans to buy CheckFree Corp. for $4.4 billion in cash, a deal analysts said will make Fiserv a top provider of electronic bill payment technology and give it additional opportunities to sell its automated banking services.

With the acquisition, which is 10 times larger than any other in Fiserv’s 23-year history, the Brookfield, Wis., firm obtains CheckFree’s longstanding relationships with the nation’s biggest banks as well as a respected bill payment product that can be marketed to the thousands of smaller banks and credit unions that already are Fiserv data processing customers.

“What CheckFree brings to the party is some assets we did not have, specifically in the electronic bill payment and presentment area,” Jeffery Yabuki, Fiserv’s president and chief executive, said in an interview.

Fiserv will pay stockowners of Norcross, Ga.-based CheckFree $48 for each share of common stock. That is a 30 percent premium over CheckFree’s Wednesday closing price of $36.83. The transaction is expected to be completed by the end of the year.

After the deal was announced Thursday, Fiserv shares closed up 31 cents at $49.50. CheckFree’s shares rose $8.57 to $45.40.

The acquisition makes Fiserv a bigger competitor of Brown Deer’s Metavante Corp. Metavante, the soon-to-be-spun-off subsidiary of Marshall & Ilsley Corp., also is considered by analysts to be a top provider of bank data processing and electronic bill payment service.

Electronic bill payment, which allows consumers to pay monthly bills over the Internet instead of mailing checks, is increasing in importance to banks. Bankers say that’s because once a consumer sets up electronic bill payments through a bank, the consumer is less likely to ever switch to another bank.

CheckFree is regarded as the premier electronic bill payment provider in the U.S., said Jacob Jegher, a senior analyst with Celent, a Boston-based technology research firm.

“There have an attractive foothold in that market,” Jegher said. “They are a well-regarded company.”

Said Avivah Litan, an analyst and vice president with the Stamford, Conn.-based technology research and consulting firm Gartner Inc.: “Many companies were born and died trying to compete with CheckFree.”

CheckFree, which has 3,600 employees, had revenue of almost $1 billion in its most recent fiscal year. Fiserv, with 23,000 employees, had revenue of about $4.4 billion last year.

“It’s a great deal for Fiserv long term,” said David Koning, an industry analyst for Robert W. Baird & Co. in Milwaukee. “CheckFree has generally served bigger banks _ some of the biggest banks in the country. And now Fiserv will be able to sell their technology into their big base of small and mid-sized U.S. banks and credit unions.”

Koning said about a third of the smaller banks and credits unions in the country are Fiserv customers.

Fiserv still derives most of its revenue from its processing of accounts and other data for financial institutions, but bill payment is an expanding segment of the financial technology industry.

“For Fiserv it’s a gutsy move to get going and get into that business because electronic payments _ there’s no question about it _ is the growing business today, and anybody who isn’t in it is going to suffer,” said M. Arthur Gillis, an industry analyst with Computer Based Solutions Inc. in Dallas.

CheckFree also offers online banking and investment management technology.

Yabuki and CheckFree’s chairman and CEO, Pete Kight, wouldn’t say whether Fiserv outbid other companies to acquire CheckFree. Gillis said, however, that it’s likely other companies both in and out of the financial technology field were interested in acquiring CheckFree.

Fiserv and CheckFree said they expect to save more than $100 million by merging their companies but could not immediately say how or where jobs might be affected. Fiserv said the acquisition is expected to add to earnings in 2008.

___

(c) 2007, Milwaukee Journal Sentinel.

Visit JSOnline, the Journal Sentinel’s World Wide Web site, at http://www.jsonline.com/

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.