Why Fiserv Stock Topped the Market Today
Key Points
This is the STAR Network debit processing business.
Numerous banks are interested in potentially acquiring this, according to media reports.
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Fiserv (NASDAQ: FISV) was serving up modest gains for its shareholders on Tuesday. The veteran fintech's stock climbed largely due to a media report that management was in discussions with several banks about selling one of its business units. This lifted the stock by nearly 2%, on a day when the benchmark S&P 500 index dipped by 0.5%.
Fed by fees
After market close on Monday, Reuters published an article stating that Fiserv had engaged in talks with several lenders about selling STAR Network, its debit card processing unit. Citing an unnamed "source familiar with the matter," the news agency wrote that the banks engaged in discussions include Bank of America, JPMorgan Chase, Wells Fargo, and PNC.
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STAR Network is essentially the "pipes" of a system that routes debit transactions among banks, transacting customers, and merchants selling purchased goods and services. Reuters quoted Fiserv data indicating the company serves over 115 million debit card holders via the network. Its tally of serviced financial institutions is over 2,800.
The Reuters article comes on the heels of a story published in The Wall Street Journal earlier on Monday. The WSJ, citing unidentified "people familiar with the matter," wrote that the banks have a strong motive to own STAR Network, as it could allow them an exemption from debit-card fee caps enshrined in federal law.
Banking on a turnaround
Neither article stated how much the sale of STAR Network might bring to Fiserv, so at this point, any potential deal is rank speculation. Yet if accurate, these reports indicate that the company is attempting to slim down and rationalize its business after a period of struggle, so it's little wonder investors greeted the news so positively. This is certainly a development worth monitoring.
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Wells Fargo is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
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