October 2, 2000

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.