$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 MCLEAN, Va., Aug. 7 /PRNewswire-FirstCall/ -- Capital One FinancialCorporation (NYSE: COF) today announced that it has entered into adefinitive agreement under which it will acquire NetSpend Holdings, Inc.,the parent company of NetSpend Corporation, a leading retail marketer ofprepaid debit cards, for $700 million in an all-cash transaction. On a GAAP basis, the transaction, including the associated integrationcosts, is not expected to have a material effect on Capital One's earningsper share in 2007 or in 2008, and is expected to be accretive in 2009. Onan operating basis, excluding integration costs, the transaction isexpected to be accretive in 2008. "This transaction is financially compelling," said Scott Grimes,Capital One's Senior Vice President, Payments. "NetSpend is profitabletoday, and based on extensive due diligence, we're confident that thecombined capabilities of both companies position us to deliver strongprofit growth in the future." The prepaid debit market is experiencing significant growth, isattractive to a wide range of consumers, and leverages Capital One's corestrengths in credit cards and banking. Prepaid debit cards offer aflexible, safe and reliable alternative to cash for millions of consumers.The acquisition will expand upon the company's existing strategicpartnership with NetSpend and further Capital One's ability to offerconsumers a broader range of payment solutions while extending its brandthrough NetSpend's strong retail presence. "Capital One offers innovative debit and credit products to help meetconsumers' needs regardless of how they spend and manage their money," saidGrimes. "With NetSpend's broad network of merchant partners, thisacquisition immediately adds a powerful channel and further extends CapitalOne's prepaid solutions to the retail environment." With more than 1.5 million active customers nationwide, NetSpend hasone of the most convenient and accessible retail networks in the country,including more than 15,000 locations where cards can be purchased and50,000 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 tolead the prepaid business after the acquisition has been finalized and willassume a key executive role within Capital One's Payments business. "We consider Capital One to be among the best payment and cardmarketers in the country," said Savard. "This transaction is the naturalnext step for our company. It enables us to accelerate the success we havehad addressing the 70 million U.S. citizens who lack or choose not to havea traditional bank account. Combining our resources with Capital Oneexpands NetSpend's ability to deliver products that drive sales and loyaltyfor our merchant partners. As an important part of Capital One, we lookforward to driving our business and the prepaid industry to the nextlevel." NetSpend's proprietary, end-to-end approach is scalable andcustomizable, delivering cost benefits and revenue building opportunitiesto partners. NetSpend distribution relationships with leading retailersinclude Safeway, Pathmark, HEB Grocery Stores, and ACE America's CashExpress. NetSpend manages all aspects of the debit card lifecycle, from thecard design and approval processes with partners and associations, toproduction, packaging, distribution, and personalization. NetSpend alsooversees inventory and security controls, renewals, lost and stolen cardmanagement and replacement. Under the terms of the agreement, NetSpend will become a subsidiary ofCapital One, N.A. The transaction, which was approved by the board ofdirectors of Capital One and NetSpend is subject to customary regulatoryapprovals and notifications and is expected to close in the fourth quarterof 2007. The company cautions that current expectations in this release forearnings, synergies and strategy are forward-looking statements and actualresults could differ materially from current expectations due to a numberof factors, including competition in the prepaid, debit, and gift cardbusiness; the company's ability to integrate operational and distributionplatforms; and general economic conditions affecting consumer income andspending. A discussion of these and other factors can be found in CapitalOne's annual reports and other reports filed with the Securities andExchange Commission, including, but not limited to, Capital One's report onForm 10-k for the fiscal year 2007. About Capital One Headquartered in McLean, Virginia, Capital One Financial Corporation(http://www.capitalone.com) is a financial holding company, with 725locations in New York, New Jersey, Connecticut, Texas and Louisiana. Itsprincipal subsidiaries, Capital One Bank, Capital One Auto Finance, Inc.,and Capital One, N.A., offer a broad spectrum of financial products andservices to consumers, small businesses and commercial clients. CapitalOne's subsidiaries collectively had $85.7 billion in deposits and $144.2billion in managed loans outstanding as of June 30, 2007. Capital One, aFortune 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 forunder-banked consumers. Grounded by a mission of financial empowerment,NetSpend is committed to meeting its customers' financial services needs ontheir terms while offering the convenience, security and acceptance ofconventional financial services. NetSpend's proprietary processing platformallows it to support prepaid card programs end-to-end from customeracquisition and card fulfillment to customer service and risk management.The NetSpend(R) Prepaid Card Network includes leading consumer brands andcompanies serving the un- banked and under-banked markets, and itsstrategic relationships include card issuers, EFT networks and payment cardassociations. For more information, visit http://www.netspend.com.
