CheckFree's share price skyrocketed on Wednesday following word of the online bill paying company's intent to buy Microsoft backed TransPoint for $1m.
TransPoint is a joint venture between the software giant and Atlanta based ecommerce and payment services company, First Data. Citigroup's Citibank also has a minority stake and the three companies will own a 23 per cent stake when the acquisition closes in the next few months.
Under the terms of the agreement, CheckFree will acquire TransPoint for 17 million shares, which values it at about $1bn based on the company's share price of $68.25 at the close of regular trading on Wednesday.
Pete Kight, CheckFree's chairman and chief executive, said: "Working more closely with Microsoft and First Data should facilitate CheckFree's ability to expand internationally."
He added that the company may be able to extend its international reach by exploiting First Data's West Union agent network, which is found in more than 82,000 locations in 176 countries, and its relationships with 28 post offices, including the German Post Bank and the French La Poste.
When the transaction is completed, CheckFree, Microsoft and First Data will collaborate on developing new products and services such as electronic invoicing and payment software.
Microsoft has agreed to include CheckFree's electronic bill payment software in its applications for five years and has guaranteed to provide it with $120m in revenue.
First Data and CheckFree will use and promote each other's services and this is expected to generate a further $60m in sales or cost savings for CheckFree.
By buying one of its chief competitors, the company hopes to secure a dominant position in the electronic bill payment industry. Its services currently reach three million customers through banks, brokers and internet sites.
It also provides customers with bills from about 60 companies such as AT&T, while TransPoint provides bills from 20 companies such as Exxon Mobil and Time Warner. CheckFree has also just signed an agreement to offer its services through America Online.
The company's shares surged past the previous 52 week watermark of $86.25, which was set on Monday, to trade as high as $124 on Wednesday.
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