February 20, 2013
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of NetSpend Holdings (NASDAQ: NTSP ) soared 29% today after payment processor Total System Service (NYSE: TSS ) agreed to acquire the debit card provider for about $1.4 billion.
So what: The all-cash deal values NetSpend at $16 per share and represents a premium of 26% to its closing price on Tuesday. Total System is making the move to expand its presence in the fast-growing prepaid processing space, but judging by its own stock's 5% decline today, Mr. Market isn't thrilled with the price being paid to do it.
Now what: The transaction is expected to close in mid-2013 and be accretive to Total System's earnings for the first 12-month period after that. "The NetSpend acquisition is truly a transformational event for [Total System] and consumers alike," said Chairman and CEO Philip Tomlinson. "It enables us to meet our strategic goals of diversifying our business, being a more innovative payment solutions provider and expanding our role within an area of payments that is expected to grow at a 20% annual rate over the next four years." So while NetSpend's upside is likely limited at this point, today's pullback in Total System might be a good opportunity to buy into those newly bolstered growth prospects.
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