AmEx Buys GE?s Corporate Payments Group

American Express will pay $1.1 billion in cash for GE Money’s Corporate Payment Services division, covering the commercial card and corporate purchasing unit of the industrial giant, the two dealmakers announced today. The deal is expected to close by the end of this month.

GE reported the division generated more than $14 billion in purchase volume worldwide last year and reported receivables of $1.1 billion. It serves more than 300 large corporate clients and that GE itself is the largest client. As part of the deal GE signed a multi-year agreement to remain a client with AmEx.

An AmEx spokesperson said the purchase fits with its “ongoing strategic focus on the payments sector. (The GE division) has a premium client base, adds $14 billion in purchase volume and an 18 percent compound growth rate.”

The deal also includes GE’s vPayment technology that processes large payment transactions while adding fraud controls. AmEx generates much of its revenues from transaction fees, or the discount rate, it charges the seller in every transaction. 

The sale fits GE’s goal of selling some of its assets in the payments field. Last December, GE Chairman Jeffrey Immelt told investors the company would like to sell its store card division that in 2006 had receivables of $35.5 billion and charge volume of $63.2 billion (“GE Puts Private Label Card Unit on the Block," December 13, 2007). Immelt said GE would also consider partnering with a firm seeking to expand its credit card business in the U.S.

The purchase will be blended with AmEx’s commercial card business that handles employee purchasing and Travel and Entertainment (T&E) expenditures for large and mid-size companies. The accounts are usually paid in full each month, fitting the profile of the charge card, in contrast to a revolving account on a credit card.

AmEx reported its commercial card clients include more than 60 percent of the Fortune 500, more than 70 percent of the U.S. Fortune 100, and local currency cards in 45 countries.

AmEx reported the deal will add to revenue growth, while bringing a “minor dilutive impact” to earnings per share.