In yet another initiative to expand its presence in Europe, the world’s leading money transfer company, Western Union Co. (WU) yesterday announced the acquisition of Finint S.r.l., one of its leading money transfer network agents in Europe.
Western Union has owned a 30% interest in Finint for over one and a half decades. Now, pursuant to the agreement, which is subject to regulatory approvals, the company would acquire the remaining 70% of interest in Finint. The transaction will be completed by the second quarter of 2011 but will not be of great value addition to full year 2011 earnings.
In April 2011, Western Union completed the acquisition of the remaining 70% interest in one of the leading super agents in Europe, Angelo Costa, for cash consideration of approximately $140 million. This acquisition will not only allow the company to access its network locations more directly and be closer to its consumers, but also help introduce new products and services such as prepaid cards more quickly. It will also enable Western Union to optimize commission rates and achieve operating efficiencies by leveraging the company’s European infrastructure, including the infrastructure attained through the FEXCO acquisition in 2009. The company is presently busy with the integration of Angelo Costa, and it expects the 2011 EPS to derive a net benefit of $0.01 from the acquisition to be reported in the second quarter 2011 results.
Western Union continues to make progress with its retail agent expansion in Europe. Since the passage of the Payment Services Directive (PSD), the number of the company’s activated retail locations has amounted to over 2,500. Presently, all these locations are recording good productivity. The European Union PSD was implemented in November 2009. It is a regulatory initiative by the European Commission, which aims to increase pan-European competition and participation in the payments industry (also from non-banks) by removing barriers to the payment service providers’ access to any European Union country.
The PSD has allowed Western Union to add agents like mobile operators, retailers, e-commerce companies and funds-transfer organizations throughout Europe. Prior to the rollout of this directive, the company had much difficulty in entering the region due to the licensing requirement and a lack of attractive partnership opportunities. The licensing requirement made the agent model too expensive. However, under the new framework, agents are essentially able to operate under Western Union’s license.
In anticipation of the Payment Services Directive, Western Union acquired the money transfer business of Europe-based FEXCO, one of its largest agents, in February 2009. Also, during September 2009, Western Union signed three major new agents in Europe – Largardère Services, Ortel Finance and PayUp.
Western Union is on track to generate its targeted 1% of total 2011 company revenue from the European retail.
Western Union competes with Minneapolis, Minnesota-based MoneyGram International Inc. (MGI). The stock of Western Union carries a Zacks #3 Rank, which translates into a “Hold” recommendation over the short term. Further, over the medium-to-long term, we suggest the investors to maintain a “Neutral” position.
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