Two young men walk past the front door at a Target store in Fairfax, Va. (Paul J. Richards / AFP/Getty…)
Discount chain Target Corp. will sell its consumer credit card business to TD Bank Group for about $5.9 billion.
The Minneapolis retailer said TD will acquire its entire Visa and private label card portfolio, putting an end to the search for a buyer that has lasted several years.
The two companies also agreed to a seven-year partnership under which Target will continue to service its cards and TD will become the exclusive issuer of Target-branded credit cards to its American shoppers.
TD will therefore be in charge of policies such setting interest rates, while Target deals with customer service and bill processing.
Target said shoppers with its Red Card credit cards, which provide a 5% discount on all purchases, will not be effected.
"This transaction achieves all of Target's strategic and financial goals for a portfolio sale," said Chief Executive Gregg Steinhafel.
Target said its third-quarter earnings per share will reflect a pre-tax gain of about $150 million due to an accounting change. The retailer will also get a pre-tax gain of $350 million to $450 million on the sale of the card portfolio.
About 90% of the proceeds will be used to reduce debt, and the remainder used to repurchase stock over time, the company said.
The deal, subject to regulatory approval, is expected to close in the first half of 2013.
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