MasterCard acquires Travelex’s prepaid CPM operations

MasterCard has purchased the prepaid Card Programme Management (CPM) operations of Travelex for US$ 458 million in cash, with an earn-out of up to an additional US $55 million if certain performance targets are met. The transaction is expected to close in the first half of 2011.

MasterCard is acquiring the Travelex operations that manage and deliver consumer and corporate prepaid travel cards to business partners around the world, including financial institutions, retailers, travel agents and foreign exchange bureaus. These operations also manage cross-border payroll, per-diem and expense-management prepaid cards for corporations. MasterCard has said it has no plans to issue cards directly as a result of this transaction.

As part of the transaction, MasterCard and Travelex signed a long-term contract whereby MasterCard will provide program management services for the Travelex Cash Passport prepaid card sold through Travelex stores and online channels.

The deal is an extension of a long-term partnership between MasterCard and Travelex. Last year, the two companies expanded their relationship by agreeing to convert the majority of Travelex card programs to the MasterCard brand and by implementing the global prepaid transaction-processing capabilities of MasterCard Integrated Processing Solutions (IPS).

“The acquisition of Travelex’s CPM operations underscores MasterCard’s commitment to the global prepaid business, which remains a key strategic focus for us,” said Ajay Banga, MasterCard President and Chief Executive Officer.

“This acquisition enables MasterCard to play a greater role in the prepaid value chain, allowing us to shape the future of prepaid, especially in high-growth markets and in the attractive cross-border payments space where we can displace cash and traveler’s cheques.”

Peter Jackson, CEO of Travelex, added, “The sale of CPM will allow us to accelerate our investment plans, particularly in higher growth regions such as Asia and South America and in the growing e-commerce channel. MasterCard is a great partner of Travelex and we are also pleased to continue to offer our customers the benefits of the Travelex Cash Passport. The sale follows a strong year for the group in which we have continued to extend our global footprint and deliver a strong performance.”

Prepaid is one of the fastest-growing payment card categories. According to a 2010 Boston Consulting Group study commissioned by MasterCard, prepaid is expected to reach more than $840 billion in global volume by 2017, a compound annual growth rate (CAGR) of 22%. This same study estimates that the prepaid open-loop market in the travel sector is expected to grow at a CAGR of 31% over the same period.

MasterCard expects the transaction to be $0.04 dilutive to its 2011 earnings per share due to amortisation and one time transaction and integration costs. For 2012, MasterCard expects the transaction to be neutral and accretive beginning in 2013.

AmEx to buy marketer for up to $ 660 million

New York: American Express Co plans to buy the German marketing company Loyalty Partner for up to $660 million, expanding its international presence.

The credit card company and transaction processor said on Thursday it will gain more than 34 million new customers and expand its high-profile rewards program with the deal.

Loyalty Partner sells rewards programs to consumers and merchants in Germany, Poland and India. It also offers consulting and analysis programs for merchants.

European private equity firm Palamon Capital Partners currently owns a 54 percent stake in Loyalty Partner. The deal is its sixth sale of an investment this year and triples its initial equity investment, the firm said.

American Express Vice Chairman Ed Gilligan said in a press release that the deal will help the company’s efforts to invest in mobile payments and “digital marketing services”.

After the financial crisis, American Express is lending mostly to affluent customers who usually pay their bills in full every month. It is increasingly relying on its transaction processing network for growth, and is expanding into new markets and technologies.

American Express said the deal is expected to close in the first quarter of 2011. It will pay 425 million euros, or $566 million, in cash up-front and will buy an equity interest valued at 71 million euros, or $94 million, from Loyalty Partners’ management over the next five years, based on performance.

American Express shares were up less than 1 percent at $46.30 by early afternoon on Thursday.

UBS Investment Bank was the sole financial adviser to American Express on the deal; JPMorgan Chase & Co’s investment bank advised the sellers, including Palamon and Loyalty Partners’ other shareholders.