Target Corporation(NYSE:TGT) has finally managed to find a buyer in the form of TD Bank Group to sell its credit card business to. The company had been looking for a buyer for quite a while, and after negotiations, and deliberations, the company finally managed to get a buyer. Target Corp. announced the good news on Tuesday, after two years of looking around to sell the credit card business to. The discounter is based in Minneapolis, and according to the rules penned down for this exchange, the price of the sale of the business has to be equivalent to the gross value of the receivables which are outstanding during the time of closing. According to this stipulation, the credit card business will be selling for about $5.6 billion.
The relationship between Target and TD Banks will not end with the sale, however. There is also a seven year contract which both the companies have entered into. According to this contract, TD Banks will take responsibility for the future of the company. What this means is, the responsibility of funding, of underwriting and of owning future credit cards and visa cards from the Target credit card business, will go to TD Banks, completely. According to this deal, the company will also have to look into the policies dealing with risk management as well as regulatory compliance. Target will play an active part too, through this deal. The company will be in charge of taking care of the accounting. The responsibility of the acceptance of applications and the parameters to do so will go to TD Banks, as will, the decisions regarding the interest rate to be charged. The responsibility of the processing of bills, along with issues of customer care and service will be handled by Target.
The Red Credit Card holders will not find any inconvenience due to this deal, said Target. These cared holders get 5 percent discounts on their transactions when buying products. TD Bank and Target will close the deal by early 2013. Target will be using the sale money and the returns from the third quarter to pay off the debts incurred by the company, after which, it will start buying stocks of the company.
Shares of TGT rose less than 1% in Tuesday’s session.