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HSBC Bank plc has sold its 49% ownership in HSBC Merchant Services to joint venture partner Global Payments Inc. for $307.7 million. The deal closed today. The two companies created the payment-processing entity in 2008 (CardLine, 6/17/08) to serve merchants in the United Kingdom and online retailers. Atlanta-based Global Payments paid HSBC $439 million for a 51% stake in the joint venture. "It was a great time for us, and it made sense for both Global Payments and HSBC," Paul R. Garcia, Global chairman and CEO, tells CardLine. The deal also includes HSBC extending its 10-year exclusive marketing agreement to refer merchants to Global, and HSBC will continue to provide the processor with bank sponsorship. Complete ownership of the joint venture gives Global "better control over the operations in terms of marketing and distribution," says Gary F. Prestopino, analyst and vice president at Chicago-based Barrington Research Associates Inc. "What was concerning investors overall is that a lot of Global's growth in the United States came from [independent sales organizations]," Prestopino says. Because the processor is obligated to share transaction revenue generated by merchants that process through these ISOs, Global saw its profit margins degraded. So buying all of HSBC Merchant Services helps balance out the revenue structure, Prestopino says. Global Payments may see improved operational efficiencies, he adds. "Once you move a merchant portfolio from a bank to a processor, there's a tremendous amount of efficiency to be squeezed out if it," Prestopino says. Global and HSBC continue to have a joint venture in the Asia-Pacific region (CardLine, 9/13/05), and HSBC may sell its shares in that, too, he speculates. "If [HSBC] did this with the UK operation, the joint venture in the Pacific Rim may be the next step if HSBC is looking to liquefy some assets," Prestopino says. During Global's third quarter ended Feb. 28, international revenue totaled $85.1 million, up 154.8% from $33.4 million during the same period last year (CardLine 4/3). Shares of Global's stock were trading for $38.46 earlier today after closing at $37.45 yesterday.

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