Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Why Green Dot Corporation (GDOT) and Safeway Inc. (SWY) Shareholders Should Be Jumping For Joy

If you haven’t heeded my constant browbeatings to keep a close eye on the financial services sector, then you’re getting a rude awakening today. Electronic payment processor Total System Services, Inc. (NYSE:TSS), also known as TSYS, agreed to purchase prepaid debit card and payroll card company NetSpend Holdings Inc (NASDAQ:NTSP) for $1.4 billion, or $16 per share — a 26% premium over yesterday’s closing price.

The deal works out as a win-win for both parties, as TSYS gets access to the rapidly growing and still largely untapped domestic prepaid debit card market, and NetSpend gets the financial backing that it was lacking as bigger names like American Express Company (NYSE:AXP) and JPMorgan Chase & Co. (NYSE:JPM) pushed their way into the market.

Green Dot Corporation (NYSE:GDOT)Another aspect of this deal that might appear lost on investors but shouldn’t is that Green Dot Corporation (NYSE:GDOT) shareholders can now breathe a sigh of relief and Safeway Inc. (NYSE:SWY) shareholders can salivate even more.

Green Dot suffered through a disastrous 2012, plummeting by 60% in July after missing and lowering its earnings estimates as competition in the prepaid sector began heating up. Both Green Dot and NetSpend would be hammered a few months later by American Express, which teamed up with Wal-Mart to introduce the Bluebird prepaid debit card. Entering 2012, Wal-Mart accounted for the lion’s share of Green Dot’s revenue. With a deal now in place for NetSpend, you can bet that Green Dot’s going to strut its stuff and attempt to lock in a few more deals with retailers in an attempt to draw the attention of a larger suitor. This is the adrenaline shot in the arm that Green Dot shareholders needed.

For Safeway, it could add even more value and investor interest to its proposed spinoff of its gift-card subsidiary, Blackhawk Network Holdings, which is expected to occur in the first half of 2013. Blackhawk sold $6.9 billion in gift cards in 2011, a 25% improvement over the previous year, and netted an average fee of 9% per card according to a report from The Wall Street Journal. Given Blackhawk’s numerous strategic partners, analysts at financial firm Janney had projected a valuation of $936 million. Given the NetSpend premium, that may be $1 billion or more when it eventually does go public.

The financial services sector is growing by leaps and bounds. From processing to prepaid debit, payroll, and gift cards, this is a sector that demands your attention. Not paying attention to the explosion of growth projected in this sector both domestically and internationally is just plain nuts!

The article Why Green Dot and Safeway Shareholders Should Be Jumping For Joy originally appeared on and is written by Sean Williams.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool recommends American Express. The Motley Fool owns shares of JPMorgan Chase.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!