WASHINGTON – In the end, the simmering fight between federal anti-trust regulators and two ATM network giants seeking to merge ended not with the bang of a judge's gavel but with the relative quiet of a negotiated settlement. In a deal announced December 15, lawyers for First Data Corporation, Concord EFS and the Department of Justice agreed that a modified form of the First Data/Concord merger can move forward, provided that First Data first divests itself of its majority holding in the NYCE Network. In early April 2003, First Data Corporation, a Denver based credit card transaction processor which owns Western Union along with the majority interest in NYCE, announced its intention to merge with Concord EFS, a firm based in Memphis, Tennessee which owns the STAR ATM Network. In late October, the Justice Department filed suit in federal court to block the merger, arguing that it would lead to too great a consolidation in the ATM and EFT world and that consumers and retailers would be hurt by the loss of competing providers. The dispute was scheduled to begin trial on December 15. Ironically, the terms of the settlement closely resembled industry executives' and analysts' predictions for how the deal would look in the end. Even though the Justice Department had not moved to challenge any of the industry's other consolidations in the last five years, skeptical observers questioned whether they would stand by and allow a merger which could put an estimated 75% of the ATM and EFT transaction market into the hands of one firm. In the end the skeptics were proved correct when the Justice Department opposed the deal. ATM and EFT executives reacted positively to the news but in a muted way, considering what a difference the proposed merger could have meant in their industry should it have been allowed to go forward unchallenged. Executives with Credit Union 24, a credit union owned ATM and EFT Network based in Tallahassee, Florida, declined to comment on the news citing a need to let more time pass in order to evaluate it. Bob Rose, CEO of the CO-Op Network, the largest credit union owned surcharge-free Network in the country, praised the dealmakers for managing to keep the entire controversy out of federal court. But he also explained that the question of what will happen to NYCE prevented the industry from really being able to gauge what the deal's impact may be. "I am just not sure who among the major ATM players would be in the market for it," said Rose. Rose noted that on the one hand First Data could certainly be described as a motivated seller and could be expected not to seek too great a premium for NYCE, yet on the other hand it is unclear which industry players would be big enough to buy it. He did, however, note that the deal meant that both financial institutions and merchants would continue to have an option for their ATM networks that they might not have had if the deal had gone forward as it was announced. Stan Paur, CEO of the Houston based PULSE EFT Association, praised the way the deal concluded and said that PULSE was happy with it. Paur was rumored to be one of the industry executives that the Department of Justice consulted when evaluating the potential impact of the merger, though PULSE never confirmed the suggestion. PULSE executives were on the record questioning the proposed merger. Paur, whose Association has both bank and credit union members, said that he expected the modified merger between First Data and Concord will signal a slowing in the consolidation that has marked the ATM industry. He also forecast an overall diminishing of the importance of brand, even as the industry moves to introduce more corners of the economy to debit transactions which use a personal identification number. Like Rose, Paur also said that there were questions about how the situation with NYCE would pan out, though he remained confident that First Data would find a buyer that would satisfy its own priorities as well as those of the Department of Justice and minority owners. The finalization of that purchase, as well as its eventual market impact, will likely rely on what assurances and concessions a potential buyer could get from NYCE's largest corporate customers, both financial institutions and merchants, he explained. -

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