MCLEAN, VA (August 7, 2007)—Capital One Financial Corporation today announced that it has entered into a definitive agreement under which it will acquire NetSpend Holdings, Inc., the parent company of NetSpend Corporation, a leading retail marketer of prepaid debit cards, for $700 million in an all-cash transaction.
On a GAAP basis, the transaction, including the associated integration costs, is not expected to have a material effect on Capital One's earnings per share in 2007 or in 2008, and is expected to be accretive in 2009. On an operating basis, excluding integration costs, the transaction is expected to be accretive in 2008.
"This transaction is financially compelling," said Scott Grimes, Capital One's Senior Vice President, Payments. "NetSpend is profitable today, and based on extensive due diligence, we're confident that the combined capabilities of both companies position us to deliver strong profit growth in the future."
The prepaid debit market is experiencing significant growth, is attractive to a wide range of consumers, and leverages Capital One's core strengths in credit cards and banking. Prepaid debit cards offer a flexible, safe and reliable alternative to cash for millions of consumers. The acquisition will expand upon the company's existing strategic partnership with NetSpend and further Capital One's ability to offer consumers a broader range of payment solutions while extending its brand through NetSpend's strong retail presence.
"Capital One offers innovative debit and credit products to help meet consumers' needs regardless of how they spend and manage their money," said Grimes. "With NetSpend's broad network of merchant partners, this acquisition immediately adds a powerful channel and further extends Capital One's prepaid solutions to the retail environment."
With more than 1.5 million active customers nationwide, NetSpend has one of the most convenient and accessible retail networks in the country, including more than 15,000 locations where cards can be purchased and 50,000 locations where funds can be loaded onto the card. In addition, NetSpend offers products and services online through its website.
NetSpend's Chief Executive Officer, Richard Savard, will continue to lead the prepaid business after the acquisition has been finalized and will assume a key executive role within Capital One's Payments business.
"We consider Capital One to be among the best payment and card marketers in the country," said Savard. "This transaction is the natural next step for our company. It enables us to accelerate the success we have had addressing the 70 million U.S. citizens who lack or choose not to have a traditional bank account. Combining our resources with Capital One expands NetSpend's ability to deliver products that drive sales and loyalty for our merchant partners. As an important part of Capital One, we look forward to driving our business and the prepaid industry to the next level."
NetSpend's proprietary, end-to-end approach is scalable and customizable, delivering cost benefits and revenue building opportunities to partners. NetSpend distribution relationships with leading retailers include Safeway, Pathmark, HEB Grocery Stores, and ACE America's Cash Express. NetSpend manages all aspects of the debit card lifecycle, from the card design and approval processes with partners and associations, to production, packaging, distribution, and personalization. NetSpend also oversees inventory and security controls, renewals, lost and stolen card management and replacement.
Under the terms of the agreement, NetSpend will become a subsidiary of Capital One, N.A. The transaction, which was approved by the board of directors of Capital One and NetSpend is subject to customary regulatory approvals and notifications and is expected to close in the fourth quarter of 2007.
The company cautions that current expectations in this release for earnings, synergies and strategy are forward-looking statements and actual results could differ materially from current expectations due to a number of factors, including competition in the prepaid, debit, and gift card business; the company's ability to integrate operational and distribution platforms; and general economic conditions affecting consumer income and spending. A discussion of these and other factors can be found in Capital One's annual reports and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-k for the fiscal year 2007.
About Capital One
Headquartered in McLean, Virginia, Capital One Financial Corporation (http://www.capitalone.com) is a financial holding company, with 725 locations in New York, New Jersey, Connecticut, Texas and Louisiana. Its principal subsidiaries, Capital One Bank, Capital One Auto Finance, Inc., and Capital One, N.A., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively had $85.7 billion in deposits and $144.2 billion in managed loans outstanding as of June 30, 2007. Capital One, a Fortune 500 company, trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.
About NetSpend Corporation
NetSpend Corporation is one of the leading providers of prepaid debit cards in the United States. A pioneer in the industry since its inception in 1999, NetSpend prepaid debit cards give financial freedom and convenience to the more than 100 million underbanked consumers in the United States. NetSpend is the only company in the prepaid debit industry to offer an end-to-end solution for consumers and merchants with a proprietary processing platform, card fulfillment, customer service and risk management capabilities. More information about the company can be found at http://www.netspend.com or by following the company on Facebook or Twitter.
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