First Data Employees Are Told of Sale Deal

By Virgil Larson, Omaha World-Herald, Neb.

Apr. 2–First Data Corp., publicly traded since 1992, announced today it has made a deal to sell itself to a private investment group for $29 billion.

Stockholders would be paid $34 a share. The stock opened at $32.88 this morning, a 20 percent jump over Friday’s $26.90 closing price. By noon in New York the price had retreated to $32.45.

Kohlberg Kravis Roberts & Co., a New York company that has put together major buyouts of businesses around the world, would acquire First Data in a deal expected to close by the end of September.

Henry Kravis, a partner in the company, engineered the buyout of RJR Nabisco in 1988. The struggle for control of the company later became the basis for the book and the movie “Barbarians at the Gate.”

First Data would not comment on the effect of the buyout on the company’s operations in Omaha, where 5,300 people work.

The company started in Omaha in 1969 as a bank cooperative organized to process MasterCard transactions. It is the world’s biggest processor of card transactions.

Selling the whole company grew out of talk in late 2005 that First Data, whose corporate headquarters is in Greenwood Village, Colo., a Denver suburb, was considering selling the Omaha-based card processing operations.

Instead it kept the card division and spun off the highly profitable Western Union money-transfer business into a new publicly traded company.

Ric Duques, who took back the reins at First Data after Chief Executive Charlie Fote was forced out in late 2005, oversaw the spinoff and then set about rebuilding the rest of the company, including the Omaha-based card operation.

The card unit prints and embosses credit and debit cards for the banks and retailers that issue them. It also processes the transactions made on those cards, and it prints and mails bills to cardholders. It has a dozen locations in Omaha.

The headquarters of what last year was renamed the Financial Institution Services division are on the old Ak-Sar-Ben campus southeast of 72nd and Pacific Streets. The company has major operations near the southwest and northwest corners of that intersection as well.

Other major pieces of First Data Corp. were the merchant services side of credit cards and an international division that ran card operations overseas.

Duques brought back David Bailis, who had left First Data in 2001, to run the card operation in Omaha. Bailis has since worked to shore up the card operation, which faces stiff competition from other processors in a maturing industry, and to find new uses for Omaha’s processing and billing machinery.

Despite producing healthy financial returns, the card division suffered by comparison with the high-flying Western Union and had lost some major banks that were clients.

Financial Institution Services has gone after health care and insurance companies as potential customers and also aims to do billing for utilities. Last year it acquired Peace Software, a New Zealand company that writes software for utilities billing.

It scored a major win last June when Citicard shifted its Sears card business to First Data from the Omaha operation’s biggest competitor, Total Systems of Columbus, Ga.

In January the Omaha unit reported that its fourth-quarter 2006 revenue of $484 million was up 10 percent and that operating profits were up 12 percent over the fourth quarter of 2005.

Bailis said then that shareholders could count on profits and revenue growth of 8 percent to 10 percent on a regular basis.

Corporatewide, First Data had profits of $1.51 billion last year on revenue of $7.08 billion.

Kohlberg Kravis Roberts is a major private investment firm. It recently had a hand in the $45 billion buyout of TXU, a Texas utility.

This isn’t the first time KKR has played a role in the future of an Omaha corporation.

Omaha-based ConAgra Foods in 1990 purchased Chicago-based Beatrice Co. from Kohlberg Kravis Roberts for $1.34 billion in stock and cash. Kohlberg Kravis paid $6.1 billion for Beatrice in 1986 and then sold pieces of the conglomerate to other buyers.

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Copyright (c) 2007, Omaha World-Herald, Neb.

Distributed by McClatchy-Tribune Business News.

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