The Western Union Company, yesterday 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 (Rs 4300 Crore approximately).
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.”
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.