Crafty; ever the party pooper...
CheckFree Shares Up on News of Bank of America-Fleet Deal
Monday, October 27, 2003 13:14 ET
By Jen Ryan Dow Jones Newswires NEW YORK --
Shares of electronic-bill-payment provider CheckFree
Corp. (CKFR) rallied on hopes for increased business
after its biggest customer, Bank of America Corp. (BAC),
agreed to acquire FleetBoston Financial Corp. (FBF).
"Clearly, today, CheckFree stock is up because of the
expectation that Bank Boston will move all of its bill-free
customers over to CheckFree," said Gary Craft, an analyst
with Financial DNA. Around 1 p.m. EST on the Nasdaq
Stock Market, shares of CheckFree were up $3.14, or
12%, at $28.91. Volume was 6.6 million shares, compared
with the daily average of 1.6 million. Bank of America
agreed to pay $47.8 billion in stock for FleetBoston. The
deal, if completed, would vault Bank of America past J.P.
Morgan Chase & Co. (JPM) to become the
second-largest U.S. bank in terms of assets behind
Citigroup Inc. (C). Mr. Craft said Bank of America
appears to be committed to outsourcing its
electronic-bill-payment services to CheckFree and, if it
continues to do so, CheckFree could see its customer
base increase 20%. But he added that outsourcing such
services to CheckFree "is cost prohibitive. I would not be
surprised if Bank of America starts to look for
alternatives," such as bringing the system in-house.
Bank of America accounts for 17% of CheckFree's total
revenue and owns 8.4% of the Atlanta-based company,
according to CheckFree's fiscal 2003 report, filed last
month with the Securities and Exchange Commission.
The relationship is based on a 10-year agreement signed
in 2000, under which CheckFree acquired the electronicbilling
and payment assets of Bank of America and
agreed to provide those services to the bank's customer
base in exchange for 10 million common shares and $35
million of cash. Bank of America also has the ability to
earn warrants on up to 10 million additional shares upon
achievement of certain milestones. A CheckFree official
told Dow Jones Newswires the company expects its
relationship with Bank of America to continue under the
2000 deal, but declined to comment further on the impact
from the acquisition. The official added, though, that
FleetBoston isn't a customer. JMP Securities analyst
David Scharf is optimistic CheckFree will benefit in two
ways from Bank of America's acquisition of FleetBoston
-- "the obvious addition of online banking customers"
operating on CheckFree's platform and the "high quality"
of Bank of America's subscribers using the service. He
added Bank of America has been the most successful
bank in promoting online bill-payment, and Fleet was "the
last missing link" among the 20 banks that outsource
online-payment services. It is most likely that Bank of
America will continue to outsource its business to
CheckFree, said Mr. Scharf, adding CheckFree could
start seeing its revenue increase as a result of the
acquisition within a year of its completion. A Bank Of
America spokesperson didn't return calls seeking
comment. Neither Mr. Craft nor Mr. Scharf owns shares
of CheckFree, and neither of their firms has
investment-banking relationships with the company. -By
Jen Ryan; Dow Jones Newswires; 201-938-5294
jennifer.ryan@dowjones.com (END) Dow Jones
Newswires |
