NEW YORK (AP) — Shares of NetSpend rose to a 2-year high Wednesday after the debit card provider agreed to be purchased by Total Systems Services Inc. for about $1.4 billion.
THE SPARK: The payments services company, which is known as TSYS, said on Tuesday that it would pay $16 per share for NetSpend. That was 26 percent above NetSpend's closing price on Monday.
The acquisition is expected to close by the middle of the year.
THE BIG PICTURE: TSYS, based in Columbus, Ga., wants NetSpend so that it can expand into the fast-growing prepaid card business. The transaction will give TSYS access to the roughly 68 million "underbanked" customers that NetSpend targets. Such people are often lower income, without a traditional bank account.
NetSpend went public in October 2010 at $11 per share.
THE ANALYSIS: Sterne Agee & Leach analyst Greg Smith said he didn't expect any higher bids for NetSpend from another company, so he cut his rating on NetSpend to "Neutral" from "Buy."
He said the deal would be a good one for TSYS, adding to the payment services company's earnings growth.
SHARE ACTION: Austin, Texas-based NetSpend's stock jumped $3.51, or 28.5 percent, to $15.80 in midday trading. The shares touched $15.96 earlier in the session, their highest point since 2010.
TSYS stock dropped $1.49, or 6.4 percent, to $21.99.