World's leading money transfer company, Western Union (WU) announced the completion of acquisition of the French operations of leading cross border payments company, Travelex Global Business Payments (“TGBP”).
The buyout of the French operations had been scheduled after the completion of the global acquisition of TGBP. Western Union completed the acquisition of TGBP in 2011 for a cash consideration of $967.8 million. The acquisition made Western Union one of the leading non-bank providers of cross-border payment services for small and medium enterprises.
France, a member country of the European Union, is one of the prime remitting countries. Despite the current economic difficulties in the Euro zone, Western Union sees the region as an attractive market given increasing demand for remittance from a section of the French population living abroad. Moreover, the money transfer market in France is controlled by just a few players offering their services at high rates. Western Union expects to utilize its infrastructure to provide remittance services in this region at competitive rates.
TGBP provides international payment services to business clients and will immediately provide Western Union exposure in 16 countries, including 7 countries where Business Solutions is yet to register its presence. We believe that this is a strategic acquisition for the company as it can penetrate a market in which it has a small share.
In 2011, the TGBP acquisition added $35.2 million of revenue and is expected to be further accretive to earnings upon full integration.
With Travelex, Western Union intends to serve small businesses, which require speed, accuracy and transparency in their cross-border payments and are often underserved by providers. Customers will be able to make transactions in 135 currencies, track foreign exchange rates and access customer care support services.
Western Union, the company that provides money transfer services worldwide, is positioning itself for future growth as it attempts to tap additional market opportunities.
The company is leveraging its existing framework – a superior franchise and a wide global network – with online solutions and mobile technologies to roll out new products and services.
Other recent acquisitions made by the company include the acquisition of Europe-based companies such as Finint and Angelo Costa. These strategic initiatives poise the company well for long-term growth.
Close rival MoneyGram International Inc, (MGI) is also aggressively expanding its operations. Recently, the company announced its expansion in Mexico, Venezuela and also launched an online service in UK.
Western Union currently retains a Zacks # 3 Rank, which translates into a short-term ‘Hold’ rating. We are also maintaining our long-term “Neutral” recommendation on its shares.
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