Douglas County-based Western Union said Tuesday that it will spend $976 million in cash to acquire a leading provider of international business payments.
The agreement with British firm Travelex Holdings Ltd. to buy its global business-payments division provides a significant opportunity for growth, Western Union executives said.
“It is definitely one of the biggest deals by Western Union in the last 50 years,” said Hikmet Ersek, president and chief executive of Western Union. “It’s a lot of money, but I think it is the right thing.”
Ersek said the acquisition will give Western Union an “immediate presence” in the competitive business-to-business, cross-border trade market in 16 countries with a potential to expand to 200 countries where Western Union offers other services.
The acquisition “provides us immediate scale, further reach and added capabilities” and will place Western Union in a “leading position in the large and growing international business-payments market,” Ersek said.
He said business-to-business customers are underserved in terms of service, speed, accuracy, product offerings and price and that the industry is fragmented.
Ersek expects that by 2012, the acquisition will result in a $400 million operating unit for Western Union.
Travelex Global Payments serves small and medium-size enterprises, corporations and third-party distribution partners, including more than 500 financial institutions.
Ersek said the acquisition of Custom House in 2009 gave Western Union an entry into the business-to-business, cross-border payments market.
He said he is focused on three strategic growth areas: consumer money transfer, business-to-business payments and stored value or prepaid, where the money is contained on a card.
The Travelex acquisition gives Western Union scale and reach in the business-payments space but doesn’t eliminate competition, Andrew Jeffrey, an analyst with SunTrust Robinson Humphrey, told Bloomberg.
The purchase takes a big bite out of the company’s $2.2 billion in cash holdings, Standard & Poor’s Rating Services analyst Rian Pressman said in a note.
Howard Pankratz: 303-954-1939 or hpankratz@denverpost.com
