MasterCard Buys Prepaid Card Firm

PURCHASE, N.Y. AND LONDON (TheStreet) -- MasterCard (MA) agreed to acquire Travelex's prepaid card program for $458 million in cash.

MasterCard is acquiring the international payment services company's operations that offers consumer and corporate prepaid travel cards to financial institutions, retailers, travel agents and foreign exchange bureaus.

The operations also manage cross-border payroll, per-diem and expense-management prepaid cards for corporations, MasterCard said. The payments network has no plans to issue cards directly as a result of this transaction, it added.

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The deal is expected to be completed in the first half of 2011. MasterCard said the transaction has an additional earn-out potential of $55 million if certain performance targets are met. The company expects the transaction to be dilutive by 4 cents to its 2011 earnings per share and the deal is expected to be accretive beginning in 2013.

Prepaid is one of the fastest-growing payment card categories. MasterCard, its rival Visa (V ), as well as bank issuers and other non-traditional financial services firms have been active in the segment.

MasterCard said the acquisition furthers its business goals by strengthening its suite of global prepaid assets, allowing the company to focus on countries outside of the U.S.

"The acquisition of Travelex's CPM operations underscores MasterCard's commitment to the global prepaid business, which remains a key strategic focus for us," said Ajay Banga, MasterCard president and chief executive officer. "This acquisition enables MasterCard to play a greater role in the prepaid value chain, allowing us to shape the future of prepaid, especially in high-growth markets and in the attractive cross-border payments space where we can displace cash and traveler's cheques."

As part of the transaction, MasterCard and Travelex signed a long-term contract whereby MasterCard will provide program management services for the Travelex Cash Passport prepaid card sold through Travelex stores and online channels.

MasterCard shares were rising 1.6% to $250.70 shortly before the market opened.

-- Written by Laurie Kulikowski in New York.

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