CheckFree Acquires TransPoint for $1B+

With an eye toward making online bill paying the norm rather than the exception, Internet billing and payments provider CheckFree Corp. announced Tuesday that it has forged a deal to buy TransPoint in a stock deal valued at well over $1 billion (US$).

To acquire TransPoint — which is owned by First Data Corp., Microsoft Corp. and Citibank — CheckFree will pay 17 million shares of its common stock, representing 23 percent of its equity.

CheckFree said it will also enter joint marketing agreements with First Data and Microsoft to generate a guaranteed minimum of $210 million in revenues and/or cost savings over a five-year period.

CheckFree’s stock was up sharply from a close of $68.25 on Tuesday to $99.87 in midday trading on Wednesday, increasing the value of the deal from $1.2 billion when it was made to approximately $1.7 billion almost overnight.

Both companies offer consumers the ability to pay their bills online and offer electronic bill delivery from about 80 companies nationwide. The companies see both capabilities as being complimentary.

“Our goal is to expand the use of electronic billing and payment so that it approaches 30 percent of U.S. households receiving and paying bills online by 2003,” said CheckFree chairman and CEO Pete Kight.

Boosting Consumer Confidence

Microsoft, First Data and CheckFree said they will work together to encourage consumers to adopt the concept of online bill paying.

As part of the deal, CheckFree entered an exclusive five-year agreement with Microsoft to provide electronic billing and payment technology used in applications and services that Microsoft develops. During that time, Microsoft said it will guarantee a minimum of $120 million in revenue to CheckFree.

First Data also said that it will enter into a five-year relationship with CheckFree, during which time First Data and CheckFree will market and use each other’s products and services. First Data will provide at least $60 million in revenue and/or cost savings to CheckFree.

First Data said it will also sell CheckFree’s electronic billing and payment services to its customers. In return, CheckFree said it will use First Data’s electronic biller connections and range of electronic payment products and services.

The companies also said that billers will also be able to deliver bills from the combined bases of TransPoint and CheckFree without having to implement duplicate systems.

Online Bill Paying Growing Fast

According to Jupiter Communications, the number of households that use online bill payment services will jump tenfold by 2003 to 18 million. The USPS says that it delivers 107 billion pieces of first class mail yearly to 130 million households.

TransPoint has made its money from customers, monthly fees and from transactions. For $5.95 a month, consumers can make up to 20 electronic payments to anyone in the world, while for $2.95 they can make payments to TransPoint’s 750 online billers.

International Implications

The deal also promises to accelerate the international adoption of online billing. TransPoint is already developing electronic billing and payment services in Australia and Canada, while CheckFree has made inroads into New Zealand, and plans to offer services in Canada, Singapore and the United Kingdom.

“Working more closely with Microsoft and First Data, both technology leaders worldwide, should facilitate CheckFree’s ability to expand internationally,” said Kight. “There may be opportunities to utilize First Data’s Western Union agent network of more than 82,000 locations, reaching 176 countries.”

“First Data also has key agent relationships with 28 post offices, including German Post Bank and French La Poste, for example, that could further extend CheckFree’s international reach,” he added.

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