July 05, 2011 08:29 AM Eastern Daylight Time
Provides Western Union a Leading Position in Business-to-Business Payments, A Growing Market and One of Company’s Three Strategic Growth Areas
ENGLEWOOD, Colo. & LONDON--(BUSINESS WIRE)--The Western Union Company (NYSE:WU) today announced it has signed an agreement with Travelex Holdings Limited to acquire the Travelex Global Business Payments division, a leading specialist provider of international business payments, for £606 million in cash.
“I am delighted that we have reached agreement with Western Union, who will benefit from TGBP's expertise and customer franchise while providing TGBP with significant opportunities for continued growth.”
Travelex Global Business Payments (TGBP) conducts business payments annually for 35,000 customers in 14 countries. The division provides international payments services to business clients, namely small and medium-sized enterprises (SME’s), corporations, and third party distribution partners including over 500 financial institutions. Projected 2011 revenues for TGBP are approximately £150 million, with a normalized EBITDA margin of approximately 30 percent.
In combination with Western Union’s existing Business Solutions business, the acquisition will give Western Union a leading position in the large and growing international business payments market, which has been driven by rapid growth in cross-border trade. Global SME cross-border payments revenues alone are estimated at $24 billion (based on McKinsey and Company estimates), which Western Union believes is similar in size to the consumer cross-border remittance market.
Hikmet Ersek, President and CEO of Western Union, said, “The acquisition of Custom House in 2009 gave us an entry into the business-to-business cross-border payments market, and Travelex Global Business Payments provides us immediate scale, further reach, and added capabilities. We are excited to welcome Travelex Global Business Payments customers and employees to the Western Union family.”
Peter Jackson, Chief Executive of Travelex, said, “I am delighted that we have reached agreement with Western Union, who will benefit from TGBP's expertise and customer franchise while providing TGBP with significant opportunities for continued growth.”
The combination of Western Union Business Solutions and Travelex Global Business Payments will provide immediate presence in 16 countries with the ability to leverage TGBP’s business-to-business expertise, distribution, and product and functionality platforms with Western Union’s brand, existing Business Solutions operations, global infrastructure and relationships, and financial strength.
Western Union plans to accelerate growth for the combined business by utilizing the enhanced capabilities and resources to drive further geographic expansion, gain access to new customers and segments, introduce the TGBP third party distribution capabilities to Western Union’s financial institution relationships, and leverage the Western Union agent network for distribution in certain markets.
Hikmet Ersek added, “Western Union remains focused on three key strategic growth areas: consumer money transfer, business-to-business payments, and stored value / prepaid. Our consumer money transfer business is strong and growing. Stored value is in the early stages of development both in the U.S. and globally, and we believe our brand and network position us well for long-term success. In business-to-business payments, the combination of Travelex Global Business Payments and Western Union Business Solutions gives us a strong foundation in a growing and largely underserved market, and provides us the opportunity to drive additional growth for years to come.”
Western Union expects the combined TGBP / Western Union Business Solutions revenue to grow at an approximately 10% CAGR over the next three years, with accelerated longer-term growth and margin expansion opportunities once integration activities have been completed. Integration expenses are anticipated to be approximately $70 million over 2 years, with synergy savings of approximately $30 million annually after full integration (estimates are based on current exchange rates). The company expects acquisition related non-cash amortization expense from the transaction of approximately $40 million annually beginning in 2012.
The TGBP acquisition is anticipated to be dilutive to Western Union’s GAAP EPS by approximately $0.02 in 2011 and approximately $0.04 in 2012 due to deal and integration costs and non-cash amortization expense (the acquisition is expected to be cash accretive in 2012). The acquisition is expected to be accretive to 2013 GAAP EPS by approximately $0.04.
The transaction is subject to regulatory approvals and satisfaction of closing conditions, and is expected to close in late 2011. The cash acquisition will be funded by Western Union’s existing cash balances, with funding primarily sourced from international cash.
Investor and Analyst Conference Call
Western Union will host a conference call and webcast at 9:00 a.m. Eastern Time today. To listen to the conference call live via telephone, dial 800-591-6945 (U.S.) or +1-617-614-4911 (outside the U.S.) ten minutes prior to the start of the call. The pass code is 53006181.
The conference call will be available via webcast at http://ir.westernunion.com. Registration for the event is required, so please register at least five minutes prior to the scheduled start time.
A replay of the call will be available approximately two hours after the call ends through July 13, 2011, at 888-286-8010 (U.S.) or +1-617-801-6888 (outside the U.S.). The pass code is 60767351. A webcast replay will be available at http://ir.westernunion.com for the same time period.
Please note: All statements made by Western Union officers on this call are the property of Western Union and subject to copyright protection. Other than the replay, Western Union has not authorized, and disclaims responsibility for, any recording, replay or distribution of any transcription of this call.
Financial Advisors
Morgan Stanley & Co. LLC served as the financial advisor to Western Union and Lazard Frères & Co., LLC provided financial advice to the Company’s Board of Directors in relation to the transaction.
About Western Union
The Western Union Company (NYSE: WU) is a leader in global payment services. Together with its Vigo, Orlandi Valuta, Pago Facil and Western Union Business Solutions branded payment services, Western Union provides consumers and businesses with fast, reliable and convenient ways to send and receive money around the world, to send payments and to purchase money orders. The Western Union, Vigo and Orlandi Valuta branded services are offered through a combined network of approximately 455,000 agent locations in 200 countries and territories. In 2010, The Western Union Company completed 214 million consumer-to-consumer transactions worldwide, moving $76 billion of principal between consumers, and 405 million business payments. For more information, visit www.westernunion.com.
About Travelex Global Business Payments
Travelex Global Business Payments is part of Travelex Holdings Limited, one of the world’s leading foreign exchange specialists.
Travelex Global Business Payments conducts business payments annually for 35,000 customers in 14 countries. The company provides payments services to a variety of business clients, including over 500 financial institutions.
Founded in 1976, Travelex Holdings Limited has grown to become the world’s leading specialist provider of foreign exchange and international business payments. The Group processes £20 billion of foreign exchange transactions every year. The Group’s consumer focused operations provide cash and pre-paid cards to over 30 million retail customers each year through a network of close to 1,000 stores and over 500 ATMs spread across 24 countries. For the year ended December 31, 2010, Travelex Holdings Limited reported revenues of £739.7m and EBITDA of £130.6m.
