First Data Corp. said Thursday it will create a new, publicly traded company out of its Western Union Financial Services subsidiary, the world’s largest money-transfer provider.
First Data, which employs about 3,000 people in Colorado, initially explored a sale of its slower-growing credit-card operations but decided that launching Western Union as its own company made more sense.
Longtime First Data executive Christina Gold, Western Union’s president, will become chief executive of the new company after a tax-free spinoff to current shareholders occurs later this year.
Investors reacted positively to the announcement, lifting First Data shares to a 52-week high of $45.30.
“After taking a hard look at the U.S. card business, we have decided to retain it,” said First Data CEO Ric Duques, who returned from retirement to head the company in November.
The “new” First Data will maintain its base in Greenwood Village, Duques said. But executives haven’t decided where Western Union, currently based in Greenwood Village, will have its headquarters.
“It is too early to tell,” said First Data spokesman Colin Wheeler, adding that Western Union operations will remain in Greenwood Village even if executives go elsewhere.
Western Union started in 1851 as a telegraph company and popularized several products, including money transfers, consumer charge cards and singing telegrams.
First Data acquired Western Union in 1995 as part of a $7 billion merger with First Financial Management Corp. and grew it into the world’s largest retail network, with 271,000 money-transfer agent locations. Last year, Western Union accounted for $4 billion of First Data’s nearly $10.5 billion in revenue.
Most First Data operations will be restructured along three lines:
First Data Commercial Services, with revenue of $3.8 billion in 2005, will work with merchants accepting credit and debit cards. Ed Labry will head the unit, expected to grow in the 8 percent range.
First Data Financial Institution Services, with $1.9 billion in revenue, will oversee the processing of credit-card payments, the company’s Star ATM and debit-card network, and other credit-card-related services. David Bailis will run the unit, which is expected to see no sales growth this year.
First Data International, with $915 million in revenues, will work with merchants and financial institutions outside the U.S. The unit, under Pam Patsley, is expected to grow revenue at 40 percent or more this year.
First Data also is reviewing what to do with 10 slower- growing units that provide about $630 million in revenue.
Investors on Thursday bid First Data shares up $2.30, or 5.35 percent. The company, the state’s largest in market value, ended the day worth $34.6 billion on the stock market.
Quixote Capital Management, a hedge fund that owns First Data stock, sees more upside to come.
“We will probably be involved as they move through this process,” said Jerry Paul, Quixote’s manager. “There is no doubt that Western Union represents the greatest value.”
Western Union could carry a stock-market value of more than $20 billion, according to analyst estimates.
Credit-rating agencies were more skeptical about the spinoff, putting First Data on a negative credit-rating watch pending details on how $5.4 billion in the company’s debt would be divided.
For the fourth quarter, First Data, citing extraordinary expenses, reported lower net income of $397.9 million, or 53 cents per share, compared with net income of $465.1 million, or 56 cents per share, a year earlier. Revenue totaled $2.77 billion, up 3 percent from $2.69 billion a year earlier.
For the year, net income totaled $1.59 billion, or $2.02 per share, compared with $1.88 billion, or $2.23 per share, in 2004. Revenue of $10.49 billion was up 4.8 percent from $10.01 billion in 2004.
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
