Fifth Third sells 51% stake in processing unit

Fifth Third sells 51% stake in processing unit

Fifth Third Bancorp has signed a definitive agreement to sell a 51% stake in its payments processing unit to private equity outfit Advent International for $561 million.

Under the deal, which is subject to regulatory approval, the unit will be spun off into a joint venture, Fifth Third Processing Solutions, which will be valued at around $2.35 billion.

Fifth Third will retain the remaining 49% in the JV as well as provide $1.25 billion in bank loans to fund the unit. Charles Drucker, president of Fifth Third Processing Solutions, will be CEO of the new joint venture.

The bank is retaining its credit card issuing business, including retail credit card and commercial multi-card services.

Kevin Kabat, chairman, president and CEO, Fifth Third Bancorp, says: "Partnering with Advent will provide the processing business with access to additional capital and resources that we believe will create significant new opportunities and incremental growth in that business."

The bank says the deal should generate a pre-tax book gain of an estimated $1.7 billion and increase its Tier 1 capital by around $1.2 billion. The move further strengthens its capital base following the $3.4 billion injection it recently received under the government Tarp scheme.

"The transaction significantly enhances the level and composition of our already very strong regulatory capital position. We believe our strengthened capital position, in combination with our strong credit reserves and earnings power, provide us with the resources and the ability to withstand a more difficult economic environment should that occur," says Kabat.

Separately, Citigroup has sold about 87% of its 17% stake in Brazillian card processor Redecard, raising $972 million.

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