Efunds Moves into Stored-Value Processing with WildCard Acquisition

Efunds Corp. signaled its intention to move aggressively into the burgeoning market for prepaid products today with an announcement that it is buying WildCard Systems Inc., a Sunrise, Fla.-based processor, for $228.8 million in cash. The deal, which is expected to close early next month, will add prepaid debit to Scottsdale, Ariz.-based eFunds' product base, complementing the company's position in PIN debit processing and transaction-fraud management. The deal also catapults eFunds into a market that in 2003, the latest year for which numbers are available, accounted for $23 billion on general-purpose prepaid plastic alone. The market is expected to grow 20% annually over the next five years, according to estimates. The company, which started out as a provider of switching software for the early ATM networks, has been following a conscious strategy in recent months of broadening its capabilities in both Internet and physical-world transaction channels. Eight-year-old WildCard, which offers host-based processing for stored-value programs, distributes prepaid cards through some 75 bank, retail, and corporate issuers, including Citigroup Inc., National City, U.S. Bancorp, Wachovia, Wells Fargo, United Health Group, Simon Properties, and Marriott. It processes gift, Visa Travel Money, money-transfer, payroll, employee-benefits, and other stored-value programs. The company is certified as an endpoint on the Visa International, MasterCard International, and Discover Financial Services Inc. networks. The deal follows a distribution agreement eFunds initiated last November with WildCard, under which the two companies have signed two unnamed financial institutions for MasterCard programs, according to a statement released today by eFunds. It also follows by only five months eFunds' $19.4-million acquisition of ClearCommerce Corp., an Internet-transaction gateway and risk-management company based in Austin, Texas. Efunds, which is financing the acquisition with cash on hand as well as a senior credit facility and term loan, says the acquisition price is subject to a 10% holdback. The deal also includes a $58.8 million earn-out linked to the WildCard unit's 2006 revenues.