MasterCard Incorporated and Travelex today announced that MasterCard has purchased the prepaid Card Program Management (CPM) operations of Travelex for 290 (US $458) million in cash, with an earn-out of up to an additional 35 (US $55) million if certain performance targets are met. The transaction is expected to close in the first half of 2011.
“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.”
MasterCard is acquiring the Travelex operations that manage and deliver consumer and corporate prepaid travel cards to business partners around the world, including financial institutions, retailers, travel agents and foreign exchange bureaus. These operations also manage cross-border payroll, per-diem and expense-management prepaid cards for corporations. MasterCard has no plans to issue cards directly as a result of this transaction.
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. Travelex, the world’s largest foreign-exchange specialist, pioneered the growing prepaid travel card market with its Cash Passport card, which provides international travellers a more secure and convenient way to carry and spend money abroad.
The deal is an extension of a strong and long-term partnership between MasterCard and Travelex. Last year, the two companies expanded their relationship by agreeing to convert the majority of Travelex card programs to the MasterCard brand and by implementing the global prepaid transaction-processing capabilities of MasterCard Integrated Processing Solutions™ (IPS). MasterCard IPS provides financial institutions world-class debit and prepaid processing solutions that are scalable, reliable, secure and flexible.
The acquisition furthers MasterCard’s strategic business goals. Adding Travelex’s CPM operations strengthens MasterCard’s suite of global prepaid business assets allowing the company to focus on countries outside of the U.S. to accelerate prepaid market entry and growth. The transaction is consistent with MasterCard’s commitment to working with partners and issuers around the world to issue MasterCard prepaid cards and deliver the most innovative prepaid card solutions to the marketplace.
For Travelex, the sale will provide further resources to continue to invest across the Group. Travelex remains focused on growing its consumer foreign exchange and international payments business for its retail and corporate customers with further expansion in fast growing emerging markets, including areas of Asia and South America. The retail distribution of cards through Travelex channels also remains a strategic priority. As part of the transaction, Travelex has agreed with its lenders to use part of the proceeds to reduce its senior debt facilities.
Prepaid is one of the fastest-growing payment card categories. According to a 2010 Boston Consulting Group study commissioned by MasterCard, prepaid is expected to reach more than $840 billion in global volume by 2017, a compound annual growth rate (CAGR) of 22 percent. This same study estimates that the prepaid open-loop market in the travel sector is expected to grow at a CAGR of 31 percent over the same period.
MasterCard expects the transaction to be $0.04 dilutive to its 2011 earnings per share due to amortization and one time transaction and integration costs. For 2012, MasterCard expects the transaction to be neutral and accretive beginning in 2013.
D.C.