First Data to spin off Western Union business; keeps US card issuing unit
26 January 2006 | 7913 views | 0
US e-payments processor First Data is spinning of its Western Union money transfer business, but the vendor has decided to retain its underperforming US card issuing unit.
The vendor said last November that its US credit card issuing unit continued to drag down the entire company's financial results and that it had hired Morgan Stanley to help explore options for the business.
It was thought that the company was looking to sell off the businsess. Just before Christmas First Data said it would be axing three per cent of its workforce - around 1000 positions - with most of the cuts occurring at the card issuing unit.
But in today's statement, the vendor says it has decided to keep the business.
Ric Duques, who returned from retirement in November to replace Charles Fote as chairman and CEO of First Data, says: "We have concluded that our shareholders will derive long-term benefit from keeping the US card issuing business as part of First Data and taking concerted actions to improve this business."
Duques says First Data expects to complete a tax-free spin-off of the Western Union business in the second half of 2006.
Following the spin-off, the firm will organise its operations into three main units - financial institution services which will include the US card issuing business, commercial services and international.
Duques says the company's strategy and new structure "will benefit our shareholders and lead First Data into a new phase of growth and expansion".
The news comes as First Data reports a 14% fall in fourth quarter profit to $398m, from $465.1m a year ago.