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Contributors: Douglas McIntyre Jon C. Ogg

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Friday, September 15, 2006

IPO Backdoor Play: First Data and Western Union Closer to Spin-Off

Stock Tickers: FDC, WU

First Data Corp (FDC) has "finally" released some more of the proposed IPO spin-off terms for its Western Union subsidiary.

The company has registered to sell 22 million shares in its shelf filing. The dollar amounts are strange though because the prospectus lists these as the Western Union Company 2006 Long-term Incentive plan. It also lists the proposed maximum aggregate listed is $93.5 million and listed as $4.25 per unit. We are going to hold off on that number for now because this is likely a mere sub-set. We need to develop split balance sheets and income statements before going out on any specific numbers.

Here is the note from WESTERN UNION: We are currently a subsidiary of First Data Corporation, which has determined to spin off our company through a series of transactions by which First Data will contribute its money transfer and consumer payments businesses to Western Union and distribute to its stockholders all of the outstanding shares of Western Union common stock. There is no current trading market for Western Union common stock. However, we expect that a limited market, commonly known as a “when-issued” trading market, for Western Union common stock will begin on or about September 20, 2006, and we expect that “regular way” trading of Western Union common stock will begin the first day of trading following the spin-off. Western Union common stock has been authorized for listing on the New York Stock Exchange under the symbol “WU.”

This is going to change the look and feel of First Data quite a bit, but it should create 2 more focused companies that the street can more easily analyze. Over the last year FDC has traded mostly in a $40 to $48 trading range, and the company is in the middle part of thatrange now after getting slightly under $40 briefly in August. FDC has a $34.4 Billion market cap, although that will ultimately change after the company completes the spin-off to shareholders.

There is a bunch of data in the new prospectus this morning, but we'll follow up with specific data next week. First Data (FDC) is definitely what we and the street would consider a "backdoor play" into the Western Union IPO, and perhaps that is why the shares have recovered more than 10% in the last month.

Jon C. Ogg
September 15, 2006

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