First Data Tumbles on Threat BofA Will Abandon Joint Venture

(Bloomberg) -- First Data Corp. fell the most in four months on concern it will lose a joint venture that accounts for as much as 12% of revenue.

Bank of America Corp. is considering ending the payment-processing deal with First Data, the Wall Street Journal reported Thursday, citing people familiar with the matter. Abandoning the 10-year-old partnership would give Bank of America the option of creating its own business to move money for merchants and consumers.

Fiserv earlier this year agreed to acquire First Data in a $22 billion deal that would create the world’s largest payment processor. First Data has three major joint ventures with U.S. banks -- Bank of America, Wells Fargo & Co. and PNC Financial Services Group Inc. -- as part of its biggest business. It owned 51% of the Bank of America venture and 40% of the others, it said in an August filing. The firm also has revenue-sharing agreements with other banks.

First Data provides Bank of America’s small-business owners with the technology they need to accept electronic payments. When accounting for its bank joint ventures, First Data is the largest provider of such services. It processes more than 3,000 transactions a second and $2.6 trillion per year.

Bank of America is required to give First Data a year’s notice before ending the venture, which is next up for renewal in June 2020, according to a regulatory filing. The partnership accounts for 10% to 12% of First Data’s revenue, the newspaper said, citing Sanford C. Bernstein analysts.

“We still see as a relatively low probability of Bank of America breaking up the JV,” SunTrust analyst Andrew Jeffrey said in a note. “This is a hugely complex and challenging undertaking, in our opinion, and we believe the companies have been working closely to improve the productivity of the relationship. That said, the announced acquisition by Fiserv could have added impetus to reconsider, in light of years of underperformance.”

First Data shares fell 2.8% to $24.72 at 11:59 a.m. in New York, after falling as much as 6% earlier Thursday. The shares are still up 46% this year.

Bank of America declined to comment, and First Data didn’t respond to a request for comment.

--With assistance from Jenny Surane, Joshua Fineman and Felice Maranz.

To contact the reporter on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Debarati Roy

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