Magazine article American Banker

Deal for Skylight to Put NetSpend in Payroll Market

Magazine article American Banker

Deal for Skylight to Put NetSpend in Payroll Market

Article excerpt

The prepaid debit card company NetSpend Corp. plans to expand into a new market segment by buying the payroll card company Skylight Financial Inc. of Atlanta.

NetSpend, of Austin, said the deal announced Thursday would create one of the largest private companies focused on offering prepaid products to unbanked and underbanked consumers.

"We're reaching consumers that banks can't serve through their traditional banking business model," NetSpend chief executive Daniel R. Henry said in an interview Thursday.

Though the average balance on a NetSpend card is only $50, the combined company expects to handle $6 billion in consumer spending this year, Mr. Henry said. (The all-stock deal is expected to close in July. The price was not disclosed.)

This is the first big move for NetSpend since Mr. Henry, then a director, was named its CEO in February, after Capital One Financial Corp.'s November termination of its agreement to buy NetSpend $700 million. Capital One instead bought a minority stake. Mr. Henry was also a co-founder of the electronic payments company Euronet Worldwide Inc.

Gwenn Bezard, a research director at the research and advisory firm Aite Group LLC of Boston, called the Skylight deal "another sign that the consolidation is accelerating in prepaid cards."

It is likely much smaller than First Data Corp.'s deal for the retail gift card specialist Interactive Communications Inc. of Atlanta, Mr. Bezard said.

First Data, of Denver, agreed to pay $980 million in cash and stock for InComm, as well as performance-based payments of up to $250 million over the next three years. The deal was announced in April and is expected to close in the second half.

The rationale for the NetSpend-Skylight deal also is different, Mr. Bezard said. "For First Data, it's all about vertical integration."

First Data already processes transactions made with InComm's cards, and buying the company gives it an opportunity to improve its profit margins, Mr. …

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