Acquisition boosts Tier's government business

Tier Technologies Inc. has signed an agreement to acquire Official Payments Corp. for $74.5 million, the company announced May 31.

The all-cash transaction is structured as a $3 per share cash-tender offer and is expected to start within the next two weeks. The purchase price does not include acquisition-related costs. The parties expect the transaction to close in early August.

The acquisition of Official Payments will add to Tier's business 1,200 state and local government clients, a major contract with the Internal Revenue Service, a proven proprietary platform and a state-of-the-art data center, said James Bildner, chairman and chief executive officer of Tier Technologies, Walnut Creek, Calif.

"The acquisition brings our transaction processing business to a new level by adding new revenue streams from state and local taxes, fees, fines, utility payments and more," Bildner said. "We also see an opportunity to pursue similar electronic transaction payment processing business in other commercial areas such as tuition and utility payment processing."

Following the acquisition, Tier will be able to offer Official Payments' clients Tier's consulting expertise in systems design and development and other transaction-based financial consulting services that Official Payments previously could not offer, Bildner said.

Official Payments of Stamford, Conn., brings Tier a new line of federal business through a contract with the IRS. Official Payments has provided services to the IRS for the payment of individual income taxes since 1999.

Official Payments won a new contract in May to collect and process individual income tax payments by credit card. The new contract authorizes the company to provide a service that allows taxpayers to make a variety of personal income tax payments with major credit cards.

The Internet and telephone payment services operated by Official Payments in 2001 included more than 225,000 federal tax payments totaling about $800 million.

Tier said it likely will retain the Official Payments brand as well as its existing sales, marketing, engineering and customer service operations and data center.

Official Payments had revenue of about $32 million for the 12-month period ending March 31.