Pay By Touch plans to buy CardSystems after CyberSource withdraws its bid

CyberSource Corp. on Saturday withdrew its offer to buy troubled payments processor CardSystems Solutions Inc., refusing to match a bid made by Pay By Touch, a provider of biometric authentication and payment solutions, a CyberSource spokesman says.

Pay By Touch today announced it is acquiring CardSystems but would not disclose terms of the deal.

CyberSource had arrived at a price for CardSystems it considered accurate and reasonable after three weeks of due diligence, the spokesman says. “At some point, another player put in a bid at a level we were unwilling to meet, and, like any public corporation, we feel strongly that you can’t overbid on assets,” he says.

CyberSource on Sept. 23 announced it had signed a non-binding letter of intent to acquire the CardSystems payment processing platform, which would give it direct access to the major credit card associations’ networks and banks. It also would have acquired the processors’ network of independent sales organizations, opening a new sales channel for CyberSource.

In announcing the agreement to purchase CardSystems, John Rogers, Pay By Touch chairman and CEO, said there are “tremendous synergies” between the two companies. “We are eager to optimize the existing sales and marketing channels that have produced exceptional growth for CardSystems over the past several years,” he said. “This will be an excellent addition to our existing Pay By Touch merchant services processing business.”

CardSystems processes transactions for more than 120,000 online and offline merchants, representing $18 billion in annual volume. The processor began seeking a buyer after it lost the right to process Visa U.S.A. and American Express Co. transactions when its poor security measures left exposed the confidential account information of 40 million cardholders.

CardSystems has since adopted measures that bring it into compliance with card industry database security standards, and Visa said it will extend until Jan. 31 the decision on whether to end its relationship with CardSystems, Pay By Touch said.