JPMorgan, FDC Agree on Long-Awaited Paymentech-CMS Combo

JPMorgan Chase & Co. and First Data Corp. have come to terms on the long-awaited merger of acquiring-service providers Chase Merchant Services LLC and Paymentech L.P. in a deal that will create a behemoth processor handling 13.1 billion electronic transactions annually. According to a news release distributed this afternoon by JPMorgan and First Data, the merged entity, which will be called Chase Paymentech Solutions LLC, will be based in Dallas and will be run by Michael P. Duffy, chief executive of Dallas-based Paymentech. Details of the merger agreement are sketchy, but JPMorgan will own 51% of the entity, with First Data holding the balance of the equity. The combined entity's management will report to a board consisting of an equal number of representatives of both the bank and First Data. The agreement also calls for Chase Paymentech Solutions to buy processing services from First Data under a 5-year contract. The industry has been expecting a move from JPMorgan and First Data regarding the two acquiring companies ever since the New York-based banking giant took a 53% stake in Paymentech, the country's largest processor of electronic payments, as a result of its acquisition last year of Bank One Corp. Indeed, there had been stirrings in the industry recently that a deal was imminent (Digital Transactions News, Aug. 15). JPMorgan operates Chase Merchant Services as a joint venture with Denver-based First Data. CMS, which is a sales organization marketing card and automated clearing house processing to merchants, relies on FDC for back-end processing. Paymentech, which has nearly 1,700 employees, handled 8.5 billion transactions in 2004, both card-present and card-not-present. CMS represents some 200,000 merchants and billers. Chase also announced it has agreed to continue its membership in the Star electronic funds transfer network, owned by FDC.