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On Tuesday, electronic payments facilitator TSYS (NYSE: TSS ) announced that it has entered into a definitive agreement to purchase prepaid card provider NetSpend (UNKNOWN: NTSP.DL ) for $16 a share, cash, in a transaction valued at $1.4 billion in total.
NetSpend brings with it an "extensive" distribution network selling prepaid debit cards at more than 62,000 locations, including retailers, check-cashing stores, income-tax preparers, and others, and a customer list stretching to more than 2.4 million accounts -- of which 46% are direct deposit accounts.
In a statement, TSYS said it believes the prepaid-debit-card market is likely to grow at 20% annually over the next four years. The company believes its purchase of NetSpend will be accretive to profits within a year after closing (planned for mid-2013), not counting the costs of acquisition related fees and expenses.
Shareholders, however, were unimpressed, bidding down TSYS shares 6.4% in Wednesday trading after the announcement. The shares closed Wednesday at $21.97. As for NetSpend, its shares rose sharply -- up 28.6% to close at $15.81, a bit below the offer price.