NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, May 6, 2015

Western Union Co. is in early-stage talks to acquire smaller rival MoneyGram International Inc., people with knowledge of the matter said, as both companies contend with stiff competition from upstart money-transfer companies.

MoneyGram surged 24 percent to $9.64 as of 10:30 a.m. in New York trading, giving the company a market value of about $513 million. Western Union rose 5.4 percent to $22.08, for a market value of about $11.4 billion.

Talks may still fall apart, said the people, asking not to be identified because the matter is private. One potential hurdle is whether antitrust regulators would block the deal, the people said. Winning approval would have been less feasible several years ago before new competitors fragmented the once heavily consolidated remittance industry, they said.

Western Union and MoneyGram — the two dominant players in the remittance industry — are facing price competition as companies including WorldRemit, TransferWise andWal-Mart Stores Inc. give their customers new options for moving cash. MoneyGramreported a loss of $72 million in the first quarter, compared with a profit of $39 million in the year-earlier period.

In an acquisition Western Union would also have to take on about $960 million of MoneyGram’s debt.