American Express Co. (NYSE: AXP) announced today that it has agreed to purchase GE Money's Corporate Payment Services (CPS) from parent General Electric Co. (NYSE: GE) for $1.1 billion. CPS provides purchasing services and cards to large corporations.

American Express said in a press release that “today’s agreement is part of an ongoing strategy to focus on the payments sector” and that the acquisition is lucrative given that “Corporate Payment Services generated over $14 billion in 2007 global purchase volume and maintained $1.1 billion in receivables at year end 2007. Its billed business has grown at a compounded rate of 18% over the last five years.”
 
Interestingly, GE is CPS’s largest client, so the terms of the deal require GE to remain a client of American Express after the sale for a set number of years.

President of American Express’s Global Commercial Card & Services Anré Williams said in the press release that, “Corporate Payment Services is a terrific business with strong leadership and talented employees who have been generating impressive growth through a combination of excellent customer service and cutting edge technological innovation. Expanding our corporate purchasing and expense management services is a top priority for American Express. Acquiring Corporate Payment Services adds to our purchasing card capabilities and gives us the opportunity to accelerate our growth. In addition, Corporate Payment Services also has excellent credit metrics and a premium client base.”

When referring to credit metrics, CPS has an advantage compared to other forms of credit because accounts are usually paid-in-full at the close of each month because charges are typically travel expenses for employees of large companies. The deal also includes GE’s vPayment technology, a fraud detector technology.

American Express, not surprisingly, expects an immediate boost to revenue from the purchase – but earnings per share growth from the deal will not be seen for a few years. Overall, the deal makes sense for American Express but it is not something to get overly excited over. American Express shares are up slightly on the news while GE shares are down slightly.

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