MasterCard Inc., the world’s second- biggest payments network, said it will acquire prepaid card- management assets from Travelex Holdings Ltd. for 290 million pounds ($458 million) to expand in one of the fastest growing segments of the charge-card market.
The cash deal with London-based Travelex would give MasterCard operations that manage and deliver consumer and corporate prepaid travel cards, MasterCard said today in a statement. The transaction is expected tobe completed in the first half of 2011, according to the statement.
Prepaid-card transactions are expected to reach more than $840 billion by 2017, according to a Boston Consulting Group study commissioned by MasterCard and released this year. Chief Executive Officer Ajay Banga, 51, is targeting markets beyond the U.S. to boost revenue growth and accelerate the worldwide consumer shift to plastic from cash and checks.
“I see growth opportunities in a number of the emerging markets, but I also see growth opportunities in developed Europe with this product,” Banga said during a conference call after the announcement.
MasterCard doesn’t plan to issue cards directly as a result of the transaction, according to the statement. The deal excludes Travelex’s retail outlets, which are located in travel hubs and tourist areas, Banga said during the call.
As part of the agreement, Purchase, New York-based MasterCard signed a long-term contract with Travelex to manage prepaid cards sold online and through the foreign exchange suppliers’ retail stores, according to the statement.
“We’re putting on the building blocks,” of being a leader in the prepaid business, Banga said on the call.
MasterCard said that the deal would add to earnings in 2013, according to the statement.
The transaction isn’t likely to be a large, new source of earnings for the company, said Sanjay Sakhrani, an analyst with Keffe, Bruyette & Woods Inc. in New York, who has an “outperform” on the stock and owns none.
“Prepaid is one of the faster growing segments in card payment and part of the reason it’s growing so fast is that it’s growing off a small base,” he said. “Prepaid is a small portion of total card volumes in the U.S. and even globally.”
MasterCard rose 58 cents to $251.22 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 1.9 percent this year.
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