The new company, eOne Global, will focus on developing new online payment services for merchants, businesses and consumers as they progress to conducting more complex transactions via the Net. First Data and iFormation said they are committing a total of about $600 million to eOne.
Payment services company First Data, which owns Western Union, said it is contributing certain operating businesses and other interests valued at nearly $360 million to the new venture. In turn, First Data will receive a 75 percent equity stake in the company.
New York-based iFormation, which was created by Goldman Sachs, Boston Consulting Group and General Atlantic Partners to back online businesses, is putting up $135 million in cash and will receive an equity interest of 25 percent in the new company and a warrant for 1.75 million shares in First Data.
First Data and iFormation also invested an additional $100 million in cash for future business development. The transaction, which is subject to customary closing conditions, is slated to close within 30 to 45 days.
Although customers have been slow to move to online bill payment, Net portals Yahoo and America Online, financial institutions such as Bank of America and Citibank, and other companies are bullish on getting people to pay bills electronically.
Late last year, 11 major U.S. banks teamed to create online banking consortium Spectrum, enlisting Sun Microsystems and Netscape Communications to help create an Internet billing system.
Despite hesitation by consumers to pay their bills electronically, a recent study foresees a bright future for the young market. According to Jupiter Communications, electronic bill payment and presentment (EBPP) will reach significant online penetration in the next few years, accounting for more than 40 million online households in 2005.
First Data and iFormation are positioning eOne as an online payment company that can give its clients and their customers immediate access to First Data's massive distribution channels, payment products and existing relationships in the sector. Atlanta-based First Data boasts more than 2 million merchant locations and 1,400 card issuers, along with millions of customers through its Western Union network.
eOne will focus on developing new technologies and finding new applications that improve existing payment products, provide greater security and make online payments easier and faster. It plans to create and operate online payment systems geared to business-to-business marketplaces and e-commerce sites as well as systems that work with a range of devices such as wireless and multi-application smart devices.
Garen Staglin, an information technology veteran, has been named president and chief executive officer of eOne, the companies said. First Data chief executive Ric Duques will serve as chairman of the board of the new company. Other eOne board members include iFormation president David Pecaut, iFormation chairman Clifton Robbins, First Data executive vice president David Bailis, and Charles Russell, First Data board member and former chief executive of Visa International.
The new venture will be based in Northern California, with offices in Menlo Park, Calif.; Omaha, Neb.; New York; Denver; London; and Hong Kong. Other international offices will be added in early 2001, the companies said.