In a grab for its share of the exploding Web-based banking market, QuickBooks parent Intuit Inc. agreed to acquire online banking services provider Digital Insight Inc. for $1.35 billion via a combination of cash and debt.Under the terms of the deal, which is expected to close during the first quarter of 2007, Intuit will tender $39 in cash for each share of Calabasas, Calif.-based Digital Insight -- roughly 18 percent over the company’s closing share price of $33 prior to the announcement. Intuit will also assume about $1 billion in debt financing.

The marriage will combine Intuit’s trademark financial management and tax software with Digital Insight’s online banking services, delivery systems and, ideally, its roster of bank customers.

At a press conference announcing the deal, Intuit chief executive Steve Bennett explained that the transaction "is all about increasing revenue growth rates."

Once the deal is completed, Intuit’s capability will expand to serve 5,000 financial institutions, 25 million consumers and nearly 7 million small businesses.

Bennett predicted that the growth in the company’s newest sector would come from small businesses having financial institutions outsource online banking to Intuit.

The 11-year-old Digital Insight, which reported $238 million in revenues for its most recent fiscal year, operates in three segments: Internet banking, business banking and lending.

Its Internet banking segment includes online banking for consumers, including bill payment, while the business banking unit encompasses online business banking for small-to-large financial institutions. However its underperforming lending unit -- which assists financial institutions in streamlining underwriting and processing consumer loans through the Internet -- has been a drag on earnings. Earlier this week, the company dismissed 20 employees from the unit and announced that it would incur a charge of $425,000 during the fourth quarter.

Jeff Stiefler, chairman and chief executive of Digital Insight, will remain with Intuit as president of the Digital unit, which will continue to operate out of its existing California and Georgia facilities.

Web-based banking has been one of the torrid growth areas for the Internet in recent years, as most institutions offering online access have begun adding new features to compliment traditional bill-paying services. One example is that both Wells Fargo and Commerce Bancorp recently joined a host of other lending institutions in adding wealth management features to their online services.

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