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Electronic Clearing Shares Slide; Intuit Cancels Deal (Update3)
By Ron Day
March 27 (Bloomberg) -- Shares of Electronic Clearing House Inc. plunged the most in almost 15 years after the company said it will hand over some profits in a government probe into online gaming and Intuit Inc. scrapped plans to buy it.
Electronic Clearing will turn over $2.3 million in earnings to the U.S. government from its Internet wallet business, which collected payments to online gambling sites, the Camarillo, California-based company said today in a statement. The U.S. in October passed a law criminalizing the processing of credit-card payments for that industry.
Intuit, maker of TurboTax software, had agreed on Dec. 14 to pay $142 million, or $18.75 a share for Electronic Clearing, a 25 percent premium to the share price that day. Intuit pursued the company to expand its online banking services to businesses. Electronic Clearing Chief Executive Officer Joel Barry said the company is open to other acquisition talks.
``That's not a mess Intuit wants to get into,'' said John Kraft, an analyst at D.A. Davidson & Co. in Portland, Oregon, who has a ``neutral'' rating on Electronic Clearing shares he said he doesn't own. After the company in October said it would exit the Internet wallet business, ``my sense was these guys were on the up and up, squeaky clean.''
Electronic Clearing shares dropped $6.40, or 34 percent, to $12.21 at 4 p.m. New York time in Nasdaq Stock Market trading in their biggest decline since July 1992. The stock has fallen 2.8 percent in the past 12 months.
Shares of Intuit, based in Mountain View, California, rose 18 cents to $27.55 in Nasdaq trading and have climbed 6 percent in the past year.
`Always Be Open'
Barry declined to comment on the federal investigation, saying only that it was in the company's best interest to cooperate with the government. Near-term results will be hurt by the payment and by expected investigation-related expenses, the company said in the statement.
``We didn't want to negotiate for a lower price'' with Intuit, Barry said on a conference call today. ``At this juncture we felt it was in the best interest to either close or terminate'' the deal, he said.
Intuit spokewoman Holly Perez declined to comment.
Electronic Clearing is ``fundamentally sound'' and will announce first-quarter results in May, Barry said.
The company and Intuit released each other from all claims related to the acquisition, according to separate statements. A non-prosecution agreement with authorities is expected soon, Electronic Clearing said in its statement.
Electronic Clearing in October said less than 10 percent of its sales were related to online gambling. It said at the time it would stop so-called Internet wallet services, which would hurt sales.
To contact the reporter on this story: Ron Day in New York at [email protected] .
Last Updated: March 27, 2007 16:05 EDT
It's incredible how well extortion and coercion work for the US government.