Equifax Hopes to Revitalize Its Stock By Spinning Off Payment-Services
Unit By CARRICK
MOLLENKAMP
Staff
Reporter of THE
WALL
STREET
JOURNAL
ATLANTA -- Equifax
<http://interactive.wsj.com/pj/q-quote.cgi?sym=efx&type=company>
Inc., seeking to energize its fatigued stock and simplify its story for
investors, on Monday said it will slice itself in two. The company, best
known for collecting consumer and commercial credit information, will spin
off to shareholders its lesser-known but faster-growing credit-card and
check-transaction processing business. The board of Equifax approved the
move Friday.
<http://interactive.wsj.com/articles/SB970181062240479795.htm>Investors
Encourage Equifax to Spin Off Payment Business (Sept. 29) The spinoff of
the payment-services division -- a new name hasn't been chosen -- is
expected to take about a year. Also to be decided is the value of the
payment-services unit and the type of ratio to be used in giving current
Equifax shareholders a stake in the newly formed company. The spinoff is
expected to be a tax-free dividend, pending approval by federal tax
regulators. Equifax competes against companies such as Trans Union Corp.
in credit information and First
Data <http://interactive.wsj.com/pj/q-quote.cgi?sym=fdc&type=company>
Corp. in the credit-card processing business. Driving the move is
frustration inside Equifax that Wall Street doesn't fully understand how
the company operates. Thomas Chapman, Equifax chairman and chief
executive, concedes that investors have found the company
"confusing" because of its two different parts: the business
that collects credit data and the payment-services unit that processes
transactions. And even those who understand Equifax's parts believe that
the value of the payment-services business is undervalued in a stock that
traded Friday down 25 cents at $26.94 in 4 p.m. New York Stock Exchange
composite trading. The stock has been flat over the past year. The biggest
disappointment to investors has been that the stock has yet to recover
from a 22% plunge in late 1998 after the company warned investors that
revenue and earnings would fall short of expectations. With 135.8 million
shares outstanding, Equifax has a market capitalization of about $3.66
billion, based on Friday's closing stock price. Mr. Chapman, who joined
Equifax in 1990 after a 20-year career in commercial banking, acknowledged
the frustration in an interview. Breaking
Up Equifax's board
has approved a split of the company's two main units in a move to be
completed by next year. EQUIFAX ·
CEO: Thomas F. Chapman, 57 years old
· 1999
Revenue: $1.8 billion ·
1999 Net income: $215.9 million BUSINESSES
THAT WILL BE SPLIT:
Information Services ·
1999 Revenue: $1.09 billion ·
1999 Operating income: $315.1
million · Business:
Consumer & commercial credit reporting Payment
Services ·
1999 Revenue: $680.7 million ·
1999 Operating income: $135.5
million · Business:
Credit-card, check transaction processing Source:
Securities filings "That's what this marketplace expects is some
action," Mr. Chapman said. "We'll provide a more focused
investment. It's sensible to separate these two things. They are just
better and stronger apart." Clearly, the company also is hoping to
recreate some of the magic it created when it spun off ChoicePoint in
1997. Mr. Chapman said that Wall Street never understood the unit that
sells consumer and commercial information to insurers until the spinoff.
ChoicePoint's stock has outperformed its former parent's by about 40% in
the past year. ChoicePoint fell 94 cents to $45.88 in Friday's 4 p.m. New
York Stock Exchange composite trading. After the spinoff, the two
companies will have separate management and boards. The payment-services
unit, which Equifax began building after the 1990 acquisition of
Telecredit Inc., is based in Atlanta. Its headquarters will be in a
separate location from Equifax. Equifax has about 14,000 employees. Among
them, 9,000 will work for Equifax, and 5,000 will work for the
payment-services business. Mr. Chapman will remain chairman and CEO of
Equifax. He will also be chairman of the payment-services business. After
the split, Equifax's businesses will include the company's U.S. and
international credit-tracking business, a unit that sells data, and its
Internet business. The bulk of the unit's revenue comes from its North
American Information Services unit. In the second quarter, that unit
contributed $204.8 million, or 41%, of Equifax's total revenue. The faster
growth of the payment-services unit also was reflected in the second
quarter, as it increased revenue by 18%, while the North American
Information Services unit increased revenue by 4%. Lee Kennedy, Equifax's
president and chief operating officer, will become president and CEO of
the payment-services unit. Investment firm Bear Stearns Cos. is acting as
the adviser to Equifax. Law firm Kilpatrick Stockton is legal counsel to
Equifax. |