Despite a Strong Bench, First Data Picks an Outsider As Its New CEO

Michael D. Capellas, a tech executive from outside the payments industry, will head First Data Corp. as the No. 1 payment processor begins its new life as a privately held company. Capellas, who held top posts at MCI Inc. and Compaq Computer Corp., will take over as chief executive from the retiring Henry C. “Ric” Duques following the planned $29 billion acquisition of First Data by private-equity firm Kohlberg Kravis Roberts & Co. Some payment executives thought Duques's successor would be one of the heads of the company's three major divisions: Edward Labry at First Data Commercial Services, the merchant-processing unit; Pamela Patsley of the international unit; or David Bailis, head of First Data Financial Institution Services, the card-issuer processing unit. “The positive spin is they (KKR) didn't want to take them out of those roles” because of recent, positive developments at all three, says consultant and former First Data executive Kurt Strawhecker, managing director of Omaha, Neb.-based The Strawhecker Group. “The negative spin would be they didn't think they were ready. I think it's the former.” In the news release announcing the appointment, KKR member Scott C. Nuttall called Capellas a “world-class executive” who “has a strong track record for vision, innovation, and value creation in large technology-related businesses and is ideally suited for this position. We are confident that he will deepen customer relationships, and his leadership will be characterized by the same excitement and passion for success that he brought to his previous companies.” Citing his meetings with employees and clients, First Data would not make Capellas available for an interview on Tuesday. In the release, however, he said, “As a leading provider of electronic commerce and payment solutions for financial institutions, merchants, and other organizations throughout the world, First Data has had a tremendous heritage for success. I look forward to joining First Data at this pivotal time and believe the company is uniquely positioned to pioneer innovative technologies for the next-generation of electronic and mobile commerce around the world.” Capellas most recently served as chief executive of telephone company MCI (formerly Worldcom) from 2002 until its acquisition by Verizon Communications Inc. in 2006, and chairman from 2002 to 2004. He was chief executive of personal-computer maker Compaq from 1999 to 2002, and chairman from 2000 to 2002. He subsequently served as president of Hewlett-Packard Co. after H-P bought Compaq. Since last year Capellas has served as a senior advisor to Silver Lake Partners, an investment firm focused on technology industries. Duques was First Data's chief executive from 1989 to 2002, when he retired for the first time. He took over again in late 2005 from his successor, Charles T. Fote. Upon returning, he said his tenure would be relatively short. His main job was to reposition the Greenwood Village, Colo.-based processor in an increasingly competitive environment where growth in some segments, especially card-issuer services, had slowed considerably. On his watch, First Data spun off wire-transfer giant The Western Union Co., reorganized its remaining divisions, and struck the buyout deal with KKR. On Monday, the struggling card-issuing division disclosed the welcome news that it had signed a long-term contract extension with PSCU Financial Services, the nation's largest credit-union service organization. St. Petersburg, Fla.-based PSCU, formerly Payment Systems for Credit Unions, has more than 500 member-owners representing 11 million debit and credit card accounts. Under the agreement, First Data will provide debit and credit processing, ATM driving, fraud-prevention services, card and statement production, data analytics, and PIN-secured debit access via the First Data-owned Star Network. First Data has provided credit and debit card processing for PSCU since 1989. KKR expects to close the buyout by Sept. 30. First Data shareholders are scheduled to vote on the proposal July 31.