UPDATE: MasterCard To Buy Payment Processor DataCash Group

MasterCard Inc. (MA) will purchase European payment processing company DataCash Group PLC (DATA.LN) for $520 million, in a move aimed at expanding its e-commerce business.

The all-cash deal will be a "longer-term important driver of our growth in e-commerce space," said Ajay Banga, MasterCard's president and chief executive, in a call Thursday morning with analysts and investors to discuss the transaction.

Banga didn't rule out other acquisitions. MasterCard "has the bandwidth and capability to keep looking at opportunities," he said.

The deal will enable the company to expand its business online by encouraging greater use of MasterCard-branded cards for online purchases in Europe and aid its launch of new e-commerce products, the company said in a statement earlier Thursday.

Under terms of the deal, MasterCard said it would pay DataCash shareholders 360 pence a share, a 54% premium to the payment processor stock's closing price Wednesday.

MasterCard said the transaction will trim 5 cents from its fourth-quarter earnings per share. The deal is expected to close by October end.

For the second-quarter, MasterCard posted a profit of $458 million, up from $349 million a year earlier. Revenue rose 6.7% to $1.37 billion.

MasterCard and bigger rival Visa Inc. (V) are insulated from credit delinquencies and defaults because they don't lend to consumers. Visa and MasterCard make money from the fees they charge banks, including J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C), to process card payments on the plastic these banks issue. These financial institutions are among the top issuers of MasterCard- and Visa-branded cards. The more consumers charge on their MasterCard and Visa plastic, the more these two companies earn by way of fees.

Last month Visa completed its $2 billion acquisition of CyberSource Corp., a provider of electronic-payment security services to online merchants. That purchase will reduce its fiscal fourth-quarter income by 3-to-4 cents per share.

MasterCard shares recently traded at $212.81, down 5 cents.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; aparajita.saha-bubna@dowjones.com

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