Capital One Acquires Nation's Prepaid Card Leader NetSpend

$700 Million purchase to establish Capital One as a leader in growing

prepaid market

Expected break even impact to GAAP EPS in 2008; accretive in 2009

Aug 07, 2007, 01:00 ET from Capital One Financial Corporation

    MCLEAN, Va., Aug. 7 /PRNewswire-FirstCall/ -- Capital One Financial
 Corporation (NYSE:   COF) today announced that it has entered into a
 definitive agreement under which it will acquire NetSpend Holdings, Inc.,
 the parent company of NetSpend Corporation, a leading retail marketer of
 prepaid debit cards, for $700 million in an all-cash transaction.
     On a GAAP basis, the transaction, including the associated integration
 costs, is not expected to have a material effect on Capital One's earnings
 per share in 2007 or in 2008, and is expected to be accretive in 2009. On
 an operating basis, excluding integration costs, the transaction is
 expected to be accretive in 2008.
     "This transaction is financially compelling," said Scott Grimes,
 Capital One's Senior Vice President, Payments. "NetSpend is profitable
 today, and based on extensive due diligence, we're confident that the
 combined capabilities of both companies position us to deliver strong
 profit growth in the future."
     The prepaid debit market is experiencing significant growth, is
 attractive to a wide range of consumers, and leverages Capital One's core
 strengths in credit cards and banking. Prepaid debit cards offer a
 flexible, safe and reliable alternative to cash for millions of consumers.
 The acquisition will expand upon the company's existing strategic
 partnership with NetSpend and further Capital One's ability to offer
 consumers a broader range of payment solutions while extending its brand
 through NetSpend's strong retail presence.
     "Capital One offers innovative debit and credit products to help meet
 consumers' needs regardless of how they spend and manage their money," said
 Grimes. "With NetSpend's broad network of merchant partners, this
 acquisition immediately adds a powerful channel and further extends Capital
 One's prepaid solutions to the retail environment."
     With more than 1.5 million active customers nationwide, NetSpend has
 one of the most convenient and accessible retail networks in the country,
 including more than 15,000 locations where cards can be purchased and
 50,000 locations where funds can be loaded onto the card. In addition,
 NetSpend offers products and services online through its website.
     NetSpend's Chief Executive Officer, Richard Savard, will continue to
 lead the prepaid business after the acquisition has been finalized and will
 assume a key executive role within Capital One's Payments business.
     "We consider Capital One to be among the best payment and card
 marketers in the country," said Savard. "This transaction is the natural
 next step for our company. It enables us to accelerate the success we have
 had addressing the 70 million U.S. citizens who lack or choose not to have
 a traditional bank account. Combining our resources with Capital One
 expands NetSpend's ability to deliver products that drive sales and loyalty
 for our merchant partners. As an important part of Capital One, we look
 forward to driving our business and the prepaid industry to the next
     NetSpend's proprietary, end-to-end approach is scalable and
 customizable, delivering cost benefits and revenue building opportunities
 to partners. NetSpend distribution relationships with leading retailers
 include Safeway, Pathmark, HEB Grocery Stores, and ACE America's Cash
 Express. NetSpend manages all aspects of the debit card lifecycle, from the
 card design and approval processes with partners and associations, to
 production, packaging, distribution, and personalization. NetSpend also
 oversees inventory and security controls, renewals, lost and stolen card
 management and replacement.
     Under the terms of the agreement, NetSpend will become a subsidiary of
 Capital One, N.A. The transaction, which was approved by the board of
 directors of Capital One and NetSpend is subject to customary regulatory
 approvals and notifications and is expected to close in the fourth quarter
 of 2007.
     The company cautions that current expectations in this release for
 earnings, synergies and strategy are forward-looking statements and actual
 results could differ materially from current expectations due to a number
 of factors, including competition in the prepaid, debit, and gift card
 business; the company's ability to integrate operational and distribution
 platforms; and general economic conditions affecting consumer income and
 spending. A discussion of these and other factors can be found in Capital
 One's annual reports and other reports filed with the Securities and
 Exchange Commission, including, but not limited to, Capital One's report on
 Form 10-k for the fiscal year 2007.
     About Capital One
     Headquartered in McLean, Virginia, Capital One Financial Corporation
 ( is a financial holding company, with 725
 locations in New York, New Jersey, Connecticut, Texas and Louisiana. Its
 principal subsidiaries, Capital One Bank, Capital One Auto Finance, Inc.,
 and Capital One, N.A., offer a broad spectrum of financial products and
 services to consumers, small businesses and commercial clients. Capital
 One's subsidiaries collectively had $85.7 billion in deposits and $144.2
 billion in managed loans outstanding as of June 30, 2007. Capital One, a
 Fortune 500 company, trades on the New York Stock Exchange under the symbol
 "COF" and is included in the S&P 100 index.
     About NetSpend
     NetSpend Corporation is one of the premier providers of innovative,
 accessible prepaid debit cards that enable financial freedom for
 under-banked consumers. Grounded by a mission of financial empowerment,
 NetSpend is committed to meeting its customers' financial services needs on
 their terms while offering the convenience, security and acceptance of
 conventional financial services. NetSpend's proprietary processing platform
 allows it to support prepaid card programs end-to-end from customer
 acquisition and card fulfillment to customer service and risk management.
 The NetSpend(R) Prepaid Card Network includes leading consumer brands and
 companies serving the un- banked and under-banked markets, and its
 strategic relationships include card issuers, EFT networks and payment card
 associations. For more information, visit

SOURCE Capital One Financial Corporation