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Capital One Acquires NetSpend for $700 MM

Capital One has announced that it has entered into a definitive agreement to acquire NetSpend Holdings, Inc., the parent company of NetSpend Corporation, a retail marketer of prepaid debit cards, for $700 million in an all-cash transaction.

"This transaction is financially compelling," said Scott Grimes, Capital One's Senior Vice President, Payments. "NetSpend is profitable today, and based on extensive due diligence, we're confident that the combined capabilities of both companies position us to deliver strong profit growth in the future."

The prepaid debit market is experiencing significant growth, is attractive to a wide range of consumers, and leverages Capital One's core strengths in credit cards and banking. Prepaid debit cards offer a flexible, safe and reliable alternative to cash for millions of consumers. The acquisition will expand upon the company's existing strategic partnership with NetSpend and further Capital One's ability to offer consumers a broader range of payment solutions while extending its brand through NetSpend's strong retail presence.

"Capital One offers innovative debit and credit products to help meet consumers' needs regardless of how they spend and manage their money," said Grimes. "With NetSpend's broad network of merchant partners, this acquisition immediately adds a powerful channel and further extends Capital One's prepaid solutions to the retail environment."

With more than 1.5 million active customers nationwide, NetSpend has one of the most convenient and accessible retail networks in the country, including more than 15,000 locations where cards can be purchased and 50,000 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 to lead the prepaid business after the acquisition has been finalized and will assume a key executive role within Capital One's Payments business.

"We consider Capital One to be among the best payment and card marketers in the country," said Savard. "This transaction is the natural next step for our company. It enables us to accelerate the success we have had addressing the 70 million U.S. citizens who lack or choose not to have a traditional bank account. Combining our resources with Capital One expands NetSpend's ability to deliver products that drive sales and loyalty for our merchant partners. As an important part of Capital One, we look forward to driving our business and the prepaid industry to the next level."

NetSpend's proprietary, end-to-end approach is scalable and customizable, delivering cost benefits and revenue building opportunities to partners. NetSpend distribution relationships with leading retailers include Safeway, Pathmark, HEB Grocery Stores, and ACE America's Cash Express. NetSpend manages all aspects of the debit card lifecycle, from the card design and approval processes with partners and associations, to production, packaging, distribution, and personalization. NetSpend also oversees inventory and security controls, renewals, lost and stolen card management and replacement.

Under the terms of the agreement, NetSpend will become a subsidiary of Capital One, N.A. The transaction, which was approved by the board of directors of Capital One and NetSpend is subject to customary regulatory approvals and notifications and is expected to close in the fourth quarter of 2007.

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