NEW YORK (Reuters) – Bank of America Corp (BAC.N), the largest U.S. bank, and First Data Corp have created a joint venture to offer electronic payment services to merchants, the companies said on Monday.
The venture will combine Bank of America’s brand name — and its 240,000 merchant relationships — with First Data’s payment services technology, Thomas Bell, chief executive of the new company, said in an interview.
First Data, owned by private equity company Kohlberg Kravis Roberts & Co., started discussions about a potential venture with Bank of America a year ago, Bell said.
Atlanta-based First Data was attracted to the venture because of the strength of Bank of America’s brand, its distribution network and client relationships, he explained.
“It was pretty obvious that the combination … was frankly going to be very powerful,” added Bell, a former management consultant and chief strategy officer of First Data.
First Data is bringing about 140,000 merchant relationships to the new company, Bank of America Merchant Services.
“This was basically a carve-out of a portion of our merchants to equal what the bank was putting in,” Bell said.
Bank of America will own 46.5 percent of the new company — called Bank of America Merchant Services — while First Data will hold a 48.5 percent stake.
The remaining stake will belong to Rockmount Investments LLC, an investment vehicle controlled by a third-party investor, the companies said. “For various tax and legal reasons we felt it was in our best interests to have a third-party investor,” said Bell, declining to name that investor.
The joint venture will be based in Atlanta and will employ about 1,000 employees during a transition period due to last between 18 months and three years, Bell said. He declined to say what will happen to the venture’s combined facilities and jobs after this period.
Bank of America said it would discuss the financial impact from the transaction when it releases its second-quarter earnings on July 17.
Shares of Bank of America were up 1.1 percent at $12.89 near midday on the New York Stock Exchange.
(Reporting by Juan Lagorio and Elinor Comlay; Editing by Lisa Von Ahn and Matthew Lewis)