First Data to wind down cheque and money order business

First Data to wind down cheque and money order business

US e-payments firm First Data is to shutter its official cheque and money order operations over the next two to three years, freeing up a potential $250-$300 million cash pile for re-investment.

First Data chairman and CEO Ric Duques says a review of the unit showed that the business is in a declining market and providing unacceptable returns on both assets and equity.

The unit processes official cheques and money orders and the revenue is primarily driven by investments in long-term securities. Over the next four to six months the vendor will convert most long-term instruments into more liquid instruments of shorter duration. Existing clients will be served through the end of their respective contract terms, but expiring contracts will not be renewed, says First Data.

The vendor says the wind down will free up between $250-$300 million in cash which it will use for acquisitions, share repurchases or other corporate purposes during 2007.

Earlier this week First Data said it had acquired the assets of Datawire Communication Networks, a Canadian provider of Internet-based transaction delivery services, as well as Washington-based Intelligent Results, which provides customer data analytics and decision management software.

First Data says its full-year earnings outlook of $1.20 to $1.26 per share from continuing operations did not include the costs and impact of closing the cheque and money order unit. The firm says it cannot provide accurate estimates due to unpredictability in the municipal bond market.

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