First Data 2009 Annual Report Download - page 34

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Banc of America Merchant Services, LLC
Transaction
On June 26, 2009, Bank of America N.A. (“BofA”) and the Company, together with Rockmount
Investments, LLC (“Rockmount”), an investment vehicle controlled by a third-party investor, formed a new
company, Banc of America Merchant Services, LLC (“BAMS”). BAMS provides clients with a comprehensive
suite of acquiring and processing payment products for credit and debit cards as well as merchant loyalty,
prepaid, check and e-commerce solutions.
The Company owns a 48.45% direct voting interest in BAMS and BofA owns a 46.55% direct voting
interest. The remaining stake in BAMS is a 5% non-voting interest held by Rockmount. The Company owns a
40% noncontrolling interest in Rockmount. The Company’s 48.45% direct voting interest in BAMS, together
with its control of the management committee, which governs BAMS, provides the Company with a controlling
financial interest in BAMS under the applicable accounting standards and rules and thus BAMS is consolidated
by the Company and reported in its Retail and Alliance Services segment. BofA’s 46.55% interest in BAMS is
presented as a noncontrolling interest component of total equity.
BofA’s and the Company’s contributions to the newly formed company were principally comprised of
merchant acquiring contract rights and relationships and sales forces. The Company’s contribution was most
significantly comprised of assets received upon the November 1, 2008 termination of the Chase Paymentech
SolutionsTM (“CPS”) alliance, though certain other assets were included as well. Rockmount’s contribution was
in the form of cash totaling $321.7 million of which $128.7 million represents the cash contributed to Rockmount
by the Company for its 40% investment noted above.
Rockmount may, at the sole option of the third-party owning a controlling interest in Rockmount, require
that BAMS redeem Rockmount’s interest in BAMS. This option is available during a specified period of time
after each of the fourth quarter of 2009 and the first and second quarters of 2010, and upon certain conditions,
additional periods thereafter. Rockmount did not exercise their option after the fourth quarter 2009. Rockmount’s
interest would be redeemed by BAMS for an amount of cash based on Rockmount’s capital account balance in
BAMS immediately prior to the redemption subject to an additional adjustment to be paid or received by the
Company and BofA based on the level of BAMS revenues for the trailing 12 month period ending at the end of
the fiscal quarter immediately prior to the exercise or extension of the option. Since Rockmount has the ability to
put its interests to BAMS (a consolidated subsidiary of the Company), the Company has classified the 3%
non-voting interest attributable to the third-party investor as Redeemable noncontrolling interest in the
Consolidated Balance Sheet rather than as Equity. The 2% non-voting interest attributable to the Company is
included with the Company’s direct voting interest in balances attributable to the Company in the Consolidated
Financial Statements.
The formation of BAMS was accounted for by the Company as a sale of a noncontrolling interest in a
subsidiary and a purchase business combination. The Company recorded a gain of approximately $33 million
($21 million, net of taxes), through adjustments to additional paid in capital and noncontrolling interest. The gain
was not material as the assets comprising the most significant portion of the Company’s contribution were
recently adjusted to fair value in the fourth quarter 2008 in connection with the November 1, 2008 termination of
the CPS alliance.
In comparing 2009 to 2008 in the “Consolidated Results” below, the impact of the BAMS alliance will be
quantified based on the contribution made by BofA as the assets contributed by the Company will continue to be
discussed as part of the termination of the CPS alliance.
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