MasterCard is buying the prepaid cash card business of foreign exchange group Travelex for 290 million pounds ($459 million), boosting its presence in a fast-growing financial services segment.

Mastercard said the transaction would be $0.04 dilutive to its 2011 earnings per share as a result of amortization and integration costs. It added it could pay an extra 35 million pounds if the business meets certain performance targets.

Travelex's card program management (CPM) division provides prepaid cash passports for overseas travelers to use at cash machines or to make purchases.

MasterCard is the world's second-largest credit and debit card processing company, behind rival Visa Inc. Both companies have said they plan to devote some of the billions of dollars of cash they have on hand to make acquisitions.

Mastercard sees pre-paid cards as one of the fastest growing parts of the financial services industry, with volumes in this sector set to reach more than $840 billion by 2017.

The acquisition of Travelex's CPM operations underscores MasterCard's commitment to the global prepaid business, which remains a key strategic focus for us, said Ajay Banga, MasterCard president and chief executive.

For Travelex, the transaction provides it with extra cash for its own expansion plans.

The deal will not change the shareholding structure of Travelex, majority-owned by private equity group Apax and often touted as a potential candidate for a listing.

Travelex founder Lloyd Dorfman, who set up the company in 1976, also has a significant stake in the group.

Travelex reported a 3 percent dip in first-half earnings in September, saying at the time it was confident its full-year profit would be higher than in 2009.

Mastercard said it expected the acquisition to be neutral to its earnings in 2012 and accretive in 2013.

($1=.6317 Pound)

(Additional reporting by Simon Meads and Maria Aspan; Editing by Dan Lalor and David Cowell)