Marshall & Ilsley Spinning Off Payment-Processing Unit

Milwaukee-based bank Marshall & Ilsley [M&I] will spin off its Metavante payment-processing unit into an independent public company valued at about $4.25 billion. M&I shares gained 8.7% to $49.83 yesterday after the Wall Street Journal reported the news. Private equity firm Warburg Pincus has committed $625 million for a 25% equity stake in the new company. M&I shareholders will receive one share of M&I Corp. stock and one share of Metavante Corp. stock for every three shares of M&I stock they hold. The deal will also include approximately $1.75 billion in new Metavante debt. M&I is spinning off the unit, which accounted for a fifth of the company's profit last year, in order to focus more exclusively on retail banking operations. The deal follows the announcement of the purchase by buyout firm Kohlberg Kravis Roberts of credit-card processor First Data Corp. Raymond James analyst Bradley Vander Ploeg: "Private-equity firms are clearly looking at this space right now because of the payment processors' ability to generate consistent cash flows." The transaction should close in Q4.

Sources: MoneyCentral, Bloomberg, Reuters
Commentary: KKR To Buy First Data For $29 Billion; Shares Jump 25% • Financial-services sector seen ripe for buyouts [Reuters]
Stocks/ETFs to watch: Marshall & Ilsley Corp. (MI). Competitors: Bank of America Corp. (BAC), US Bancorp (USB), Wells Fargo & Co. (WFC), Fidelity National Information Services Inc. (FIS), Fiserv Inc. (FISV), Total System Services, Inc. (TSS). ETFs: KBW Bank ETF (KBE), WisdomTree High-Yielding Equity (DHS), iShares Dow Jones US Regional Banks (IAT), iShares Dow Jones U.S. Financial Services (IYG), Rydex S&P Equal Weight Financial Services (RYF)

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