American Express Co will acquire AOL co-founder Steve Case's Revolution Money Internet-based payment platform for $300 million, the credit card company and network said.
Revolution Money, launched by Case's Revolution LLC in 2007, provides payments through an Internet platform. It also issues prepaid cards that can be used for offline payments or to withdraw cash from ATMs in the United States.
The company positioned as a low-cost option with 400,000 members and is accepted at over one million merchants such as Walgreens Co and Barnes & Noble.
No names or account numbers appear on Revolution cards and transactions are authorized by using a PIN number, American Express said in a statement. Revolution Money's online person-to-person payment accounts are insured by the Federal Deposit Insurance Corp.
“We want to provide a range of options and choices for our customers and merchants,” American Express Chief Executive Kenneth Chenault told a conference call.
The acquisition, which is subject to regulatory review, is expected to close in the first quarter of 2010.
Jason Hogg, founder and chief executive officer of Revolution Money, will continue as president and CEO of the company.
Ted Leonsis, Revolution Money's chairman, will become a special adviser to American Express CEO.
Analysts have said American Express is recovering from the recession faster than other financial companies and should emerge stronger than other credit card issuers, as it relies more than its peers on affluent and corporate customers.
The company cut 11,000 jobs and reduced spending to save $2.5 billion, part of which it will invest to grow.
Earlier this week, American Express Chief Financial Officer Dan Henry said at the Reuters Global Finance Summit in New York that the company was open to “bolt-on” acquisitions worth less than $1 billion.
Revolution Money will operate as a subsidiary of American Express and will be the first component of its Enterprise Growth organization, a group recently formed to enhance the company's capabilities to generate fee revenue and drive it into new payment areas.
Unlike rivals MasterCard Inc and Visa Inc, which only process transactions, American Express lends and also operates its own payment network. (Reuters)