California-based CyberSource Corporation has signed a letter of intent to acquire the assets of rival CardSystems Solutions, the Atlanta-based payments processor which was hit by a massive security breach in May this year that potentially exposed more than 40 million credit cards to fraud.
In a statement CyberSource, which mostly processes card-not-present transactions, says it intends to acquire substantially all of the assets of CardSystems for an undislosed sum, including the firm's payments platform which processes credit card transactions on behalf of more than 120,000 merchants.
CyberSource spokesman Bruce Frymire told The Wall Street Journal that the terms of the deal call for CyberSource to acquire the operations of CardSystems, but the transaction would be structured so that CyberSource doesn't assume any of CardSystems' liabilities.
MasterCard said in June that its team of security experts traced a data breach - the largest ever reported - to CardSystems. Later both Visa and American Express said they would ban the firm from processing their payments as of 31 October 2005, although any potential acquisition could affect these plans. MasterCard said it was giving the firm "a limited amount of time" comply with its own security requirements.
In the aftermath of the incident, CardSystems CEO John Perry admitted that the company should not have been retaining the records that were breached and had therefore violated data protection and storage rules established by MasterCard and Visa. Earlier this month CardSystems presented the card companies with an audit saying it now meets the Payment Card Industry (PCI) data security standards.
CyberSource says both it and CardSystems are now working with the card associations and banks to provide uninterrupted processing for CardSystems merchants and channel partners.
Commenting on the acquisition, Bill McKiernan, chairman and CEO of CyberSource, says: "It will mean a strategic expansion of CyberSource's payment platform, and allow current CardSystems customers and partners to continue processing without interruption."
CyberSource says the CardSystems platform will enable it to expand its core business serving e-commerce merchants, through capabilities such as retail point-of-sale processing for multi-channel merchants and automated chargeback management.
The transaction, which is subject to further due diligence, is expected to close in the fourth quarter of 2005.