JPMorgan Chase and First Data have agreed to an early exit of their joint venture, Chase Paymentech Solutions. Instead of the 2010 expiration date on the current agreement, the two companies have agreed to split up the payments and merchant acquiring business by the end of 2008.
When private-equity firm Kohlberg, Kravis, Roberts & Co. acquired First Data last September, it triggered a change-of-control provision that gave 51% owner JPMorgan Chase the right to negotiate an early end to the current agreement.
After the transition, JPMorgan Chase and First Data will operate separate payment businesses. In 2007, Chase Paymentech processed approximately 19.7 billion payment transactions, with more than $719 billion in annual bank card and debit volume. Chase Paymentech’s customer base includes 70 percent of leading e-commerce businesses and more than 600,000 merchants worldwide.
JPMorgan Chase will retain 51% of the joint venture’s assets, including most of its employees, the Canadian and European operations, the Dallas headquarters and the Chase Paymentech name.
First Data will continue to provide transaction processing and data commerce solutions for merchants through its current technology platforms and will assume management of the full-service ISO and Agent Bank unit of the joint venture. It will integrate its 49% of the joint venture’s assets and a portion of the employees into its business.
On April 28, First Data said it has reached an agreement to acquire InComm Holdings Inc. for $980 million, plus contingent future payments of up to $250 million. InComm is a distributor of gift cards, prepaid wireless products, reloadable debit cards, digital music downloads, content, games, software and bill payment solutions.