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CheckFree buys TransPoint
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February 15, 2000: 9:14 p.m. ET
E-payment firm pushes into online billing in $1.2B deal with MSFT, First Data venture
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NEW YORK (CNNfn) - Electronic billing and payment service provider CheckFree Holdings Corp. agreed Tuesday to merge with TransPoint, a rival joint venture led by First Data Corp. and Microsoft Corp., for about $1.2 billion in stock, marking a united effort to bring online billing to U.S. consumers.
As part of the transaction, Atlanta-based CheckFree will give 17 million shares - valued at about $1.2 billion based on Tuesday's closing price - to Microsoft and First Data in exchange for all outstanding shares of TransPoint, a venture they began in 1997 with minority investor Citibank. Microsoft, First Data and Citibank will together own about 23 percent of CheckFree.
"Everybody who looks at bill payment and presentment says it's going to be big," said Lewis Levin, president and CEO of TransPoint and a vice president at Microsoft, in an interview. CheckFree will provide billing infrastructure, while Microsoft will develop consumer services through its MSN and MoneyCentral web sites and its next-generation Windows platform.
Electronic billing service providers have shown moderate success at encouraging consumers to pay their bills online. The problem has been in lining up companies that send out those bills - such as a water or telephone companies - to distribute those bills electronically.
"By putting [the companies] together, we hope to make the message much crisper for the billing community," Pete Sinisgalli, CheckFree's president, told CNNfn.com. "The need is to accelerate and get everybody into the market."
Meanwhile, CheckFree receives a five-year, $120 million deal with Microsoft to provide electronic billing and payment technology used by the software giant to create applications and services. First Data, for its part, and CheckFree are expected to jointly market and use each other's products, in a deal worth at least $60 million to CheckFree in revenues and/or cost savings, also over five years.
Pete Kight, CheckFree's chairman and chief executive officer, said the companies have set a goal of expanding the use of electronic billing and payment to nearly 30 percent of U.S. households receiving and paying bills online by 2003.
CheckFree, which is backed by financial software provider Intuit (INTU: Research, Estimates), delivered about 38,000 bills to some of its 3 million customers last December. The company faces competition of a bank-backed venture called Spectrum and dozens of smaller rivals, said Sinisgalli.
Sinisgalli said that he doesn't expect the deal to improve CheckFree's revenues in the near-term, but down the road the company expects broad synergies.
Microsoft, First Data and Citibank will together contribute $100 million to TransPoint, and upon closing of the deal those funds will be transferred to CheckFree. Microsoft and First Data each will gain a seat on the CheckFree board of directors.
Shares of CheckFree (CKFR: Research, Estimates) fell 1-7/8 to 68-1/4 Tuesday. Microsoft (MSFT: Research, Estimates) shed 1-1/16 to 98-9/16, First Data (FDC: Research, Estimates) added 1-11/6 to 48-1/4 and Citigroup (C: Research, Estimates), the parent of Citibank, rose 7/8 to 54-7/8. 
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