CheckFree Soars on Buyout

Telecom service companies with large customer bases, including Verizon Communications (VZ Quote) and AT&T (T Quote) use this bill processing technology.

During the last fiscal year, CheckFree processed over 1.1 billion payment transactions, a 25% increase. The company delivered nearly 185 million electronic bills during fiscal year 2006, an increase of 32% over the prior year.

The company's stock has suffered largely because of uncertainty over whether it will lose Bank of America as a customer. Bank of America ( BAC Quote) is the second-largest U.S. bank, and one of CheckFree's largest customers.

The company's quarterly financials have also cast a pall on CheckFree's growth story. For the past several quarters, operating profit growth has generally lagged growth in revenue. In the last three quarters, revenue growth has been mired in the single digits.

But prior to the acquisition, analysts had forecast a rebound, boosting quarterly revenue by 21% and operating profit by 11%.

Clinching the deal before this anticipated pop in revenue and profit may have allowed Fiserv to capitalize on weakness in CheckFree's stock price.

Fiserv said it expects the deal to provide $100 million in annual cost savings and $125 million in "revenue synergies." This means that once the two companies combine their expertise and customer bases, they should be able to generate an additional $125 million above and beyond their standalone revenue potential.

The extra revenue and cost savings should take full effect by 2008, adding extra fuel to Fiserv's earnings per share, the company said.

Fiserv shares were recently trading up 24 cents to $49.43.

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