Deluxe Corp. is best known as the largest supplier of checks in the United States, but early Thursday it showed how serious it is about staking a major claim in digital payments. The Shoreview, Minn.-based company announced it has agreed to pay $960 million in cash for First American Payment Systems L.P., a 31-year-old, Fort Worth, Texas processor serving 159,000 merchants, as well as independent sales organizations and independent software vendors.
At a stroke, the deal, which is expected to close in the second quarter, will give Deluxe entrée to the point-of-sale payments market with a top-25 acquirer and double revenue for its payments division to an expected $600 million annually, the company said. The transaction is also the largest in Deluxe’s 106-year-old history. “First American’s end-to-end payments platform presents significant cross-sell opportunities as we continue to invest in our higher growth payments segment,” noted Deluxe president and chief executive Barry McCarthy, in a statement.
Researchers’ quick reaction to the news was largely positive early Thursday. “This [deal] appears to be a smart strategic move as Deluxe has been evolving into a digital-first company with more emphasis on payments and business services,” says Raymond Pucci, director of the merchant-services practice at Mercator Advisory Group, a Marlborough, Mass.-based consulting firm, in an email message. “This gives an instant boost to Deluxe right out of the gate.”
McCarthy: “First American’s end-to-end payments platform presents significant cross-sell opportunities.”
Deluxe also made plain it expects First American’s links to merchants, ISOs, and ISVs to complement its own deep roots in financial institutions and small businesses. “Our acquisition of First American will enable Deluxe to participate in merchant services, a part of the strong secular-growth payments industry,” said Michael Reed, president of payments, in a statement. “With this combination, Deluxe and First American customers will have access to a broader array of valuable and robust technology services and solutions. We expect to offer these merchant services to our thousands of financial institution customers, millions of small businesses and hundreds of the world’s biggest brands.”
Neil Randel, who founded First American in 1990 and serves as its chief executive, will become managing director, merchant services at Deluxe. “Today’s announcement is a testament to the accomplishments of the First American team over the last 30 years that have established our company as a deeply trusted payments partner with an unwavering focus on customer service,” Randel said in a statement.
Reed and McCarthy themselves have deep roots in electronic payments, having served together at First Data Corp. (now part of Fiserv Inc.). McCarthy left First Data in 2018 to take over Deluxe. Reed ultimately became a top executive at Bank of America Merchant Services, leaving that entity for a short stint at Barclays before arriving at Deluxe in 2019.
Wall Street’s reaction to the early-morning announcement was muted at mid-morning, with Deluxe’s shares trading down a penny at $43.60. The stock, however, has climbed from just over $29 since the start of the year.