First Data Selling Its Card Issuing Unit.

Publication: Electronic Payments Week

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COPYRIGHT 2005 Access Intelligence, LLC.

First Data Corp.'s hiring of Morgan Stanley last week to advise it on selling its Card Issuing Services unit prompted observers to scratch their heads about where it will take the company. While the move makes some short-term sense, it's hard to imagine where it will take First Data in the long term, they say.

There's little question that chairman and chief executive Charlie Fote picked the right time to sell: The logical buyer would most likely be a private equity group, and that industry has about $100 billion in investment capital sloshing around and unspent this year, according to Thomson Venture Economics. Assuming that treasure chest is used to buy three to five times that amount in leverage--it used to be called the leveraged buyout business--that means the business's executives have about $300 to $500 billion to get off their hands somehow by year-end, or reduce their year-end bonuses and confess failure to their investors, which are mainly pension funds.

In the 1980s, that sort of situation created what used to be called motivated capital--money more interested in finding a home than worried about potential problems that would...

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