Payments processor Tsys says it stand to lose four per cent of its annual revenue as a result of plans by Bank of America to switch its 240,000 merchant relationships to a new joint venture company in partnership with First Data.
The Columbus-based processor confirms that it has had contact with Bank of America - which signalled its intentions earlier this week - but that the bank has not yet communicated the timing or extent of the deconversion from Tsys' systems.
The new Banc of America Merchant Services JV will be approximately 46.5% owned by Bank of America and 48.5% by First Data, with the remaining stake held by Rockmount Investments, an investment vehicle controlled by a third party investor. The combined entity will process over one billion transactions per month.
The Tsys merchant processing contract is set to expire in April 2010 and BofA will be subject to a penalty fee should it terminate the deal before then.
Tsys says it will operate under the current contract until it receives formal notice of termination. The company expects that BofA's merchant processing business will contribute approximately $0.02 per share to its projected earnings per share in 2009.
It says the potential loss of the business will not have a material adverse effect on its financial position, results of operations or cash flows.
This is the second time in recent years that Tsys' revenues and earnings have been hit by Bank of America. In 2006, the bank took away 45 million consumer card accounts - representing 11% of Tsys annual revenues - after purchasing MBNA in a $35 billion deal.
Alongside merchant processing, Tsys provides a number of additional services to Bank of America, including commercial card processing, small business card processing and card production services.