Why NetSpend Shares Skyrocketed

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of NetSpend Holdings soared 29% today after payment processor Total System Service agreed to acquire the debit card provider for about $1.4 billion.

So what: The all-cash deal values NetSpend at $16 per share and represents a premium of 26% to its closing price on Tuesday. Total System is making the move to expand its presence in the fast-growing prepaid processing space, but judging by its own stock's 5% decline today, Mr. Market isn't thrilled with the price being paid to do it.


Now what: The transaction is expected to close in mid-2013 and be accretive to Total System's earnings for the first 12-month period after that. "The NetSpend acquisition is truly a transformational event for [Total System] and consumers alike," said Chairman and CEO Philip Tomlinson. "It enables us to meet our strategic goals of diversifying our business, being a more innovative payment solutions provider and expanding our role within an area of payments that is expected to grow at a 20% annual rate over the next four years." So while NetSpend's upside is likely limited at this point, today's pullback in Total System might be a good opportunity to buy into those newly bolstered growth prospects.

Interested in more info NetSpend?Add it to your watchlist.

How about Total System?Add it to your watchlist.

The article Why NetSpend Shares Skyrocketed originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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