Nordstrom’s stock jumped in after-hours trading after the company said it closed on the deal to sell its credit card business to TD Bank for $2.2 billion.
The stock rose by as much as 5 percent to $75 in the post-market session. Nordstrom originally said in May that it would turn over the Visa and private-label consumer credit card portfolio to TD Bank.
The two companies have entered into a long-term agreement under which TD Bank will be the exclusive card issuer for Nordstrom-branded Visa cards and Nordstrom customer credit cards. The retailer will fund and manage the loyalty program, Nordstrom debit cards and Nordstrom employee accounts.
“We look forward to our collaboration with TD, a premier financial institution that shares our customer focus. Our mutual commitment to having Nordstrom employees serve our customers directly is paramount to this partnership,” said Blake Nordstrom, the retailer’s co-president. “We are also pleased to be able to return capital directly to our shareholders using our balanced approach to capital allocation.”
The $2.2 billion represents the credit card receivables. In order to make the transaction go more smoothly, Nordstrom prepaid $325 million of secured debt due October 2016. The net proceeds of $1.8 billion, less the $325 million for the prepaid debt and less the $35 million to $45 million in transactions costs, will be paid out to shareholders.
The board of directors has chosen to pay a special cash dividend of $4.85 a share of outstanding common stock and also authorized a share repurchase program of up to $1 billion. The special cash dividend should cost the company roughly $900 million.
Nordstrom’s stock has dropped 3 percent since the transaction was revealed on May 26. Overall, the stock is up 1.6 percent for the past year.
