First Data Expects a $1B Revenue Lift from Venture

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Byline: Steve Billls

First Data Corp. expects its new joint venture with Bank of America Corp. to contribute $300 million to its revenue in the second half of this year and $700 million in 2010, Michael D. Capellas, its chairman and chief executive officer, said Friday.

The Denver company, the nation's largest payment processor, also announced that it plans to move its global headquarters to Atlanta, where the venture, Banc of America Merchant Services LLC, will also be based, and where Capellas and Phil Wall, First Data's chief financial officer, already live.

"This will actually be the first time in the company's history we've all been together," Capellas said during a conference call Friday.

First Data already has a significant presence in Atlanta, with 750 employees, and expects to maintain its operations in Denver and in Omaha.

And though First Data has already incorporated Bams, as executives call the venture, into its consolidated balance sheet for reporting purposes, the company posted another quarterly loss Friday, its seventh in the eight quarters since it was acquired in September 2007 by the private-equity firm Kohlberg Kravis Roberts & Co.

Capellas said the integration of the two merchant processing operations would take 18 months, before Bams begins to contribute to the bottom line.

First Data uses adjusted earnings before interest, taxes, depreciation and amortization as its preferred measure of its operating performance.

Its interest expenses have been heavy since the $29 billion KKR buyout in September 2007. Its third-quarter 2007 report even separated out its $56.5 million profit from July 1 to Sept. 24, the day the sale closed, and a subsequent $28.7 million loss from Sept. 25 to Sept. 30.

Since then, First Data's bottom-line losses have ranged from $164.4 million to $3.2 billion; the latter figure was because of a fair-value writedown in the third quarter of 2008, after JPMorgan Chase & Co. broke up the Chase Paymentech Solutions joint venture that had been 49% owned by First Data.

But EBITDA has come in consistently above $600 million, except in the first quarters of the past two years. …