On Feb 26, MoneyGram International Inc. (MGI) announced the purchase of Blue Dolphin Financial Services in order to expand its payment services in high-growth potential European markets. The acquisition unlocks growth avenues for MoneyGram by allowing penetration in the Belgium, Netherlands and Luxembourg (Benelux) markets, where Blue Dolphin already operates through 18 centers. However, the terms and value of the deal remain undisclosed.
Additionally, the acquisition will allow MoneyGram to capitalize on the growing opportunities for the payments services that has been generated by the new European Union (EU) payment services directive, passed in Nov 2009.
The new directive aims to create a single market for remittances, while also widening the scope for making cross-border payments easy, efficient and secure. It also encourages improved competition by opening up payment markets to new and foreign entrants such as MoneyGram, thus fostering greater efficiency and cost-reduction.
Hence, the company is in the process of evolving advanced ways for establishing itself across the region. Moreover, Benelux remains the key centers of remittance for Turkey and many highly regulated countries in Europe and Africa, including Congo, Democratic Republic of Congo and Morocco.
Through its alliance with Blue Dolphin, MoneyGram will be able to support its regional strategy of constant improvement in the payment services and expand its presence with Benelux businesses.
Overall, money transfer and payments business remains the driving force for MoneyGram and going forward, management projects a strong remittance market in the EU. The company continues to grow by expanding its distribution channels, creating new products and services and making strategic acquisitions and alliances. With this strategy, MoneyGram intends to grow by delivering better value to its customers in order to drive market share gains.
We believe that MoneyGram has the potential to overcome the impact of the volatile U.S. dollar against other currencies and additional losses in its investment portfolio, once the global economy rebounds to its historical highs. Hence we maintain an Outperform recommendation on the stock.
Read the full analyst report on “MGI”
Zacks Investment Research
