Back to top

Image: Bigstock

MoneyGram (MGI) to be Acquired by Madison Dearborn for $1.8B

Read MoreHide Full Article

MoneyGram International, Inc. recently announced that it has agreed to be acquired by Chicago-based private equity firm Madison Dearborn Partners, LLC for $1.8 billion. Madison Dearborn affiliated funds are expected to pay $11 for each outstanding MGI share, which indicates a premium of around 50% to MoneyGram’s Dec 14, 2021 closing price. Shares of the company jumped 19.6% yesterday, following the news.

Its shares will not be available in the public domain after the transaction closes. The Dallas, TX-based leading global money transfer and payment service provider expects to go private, which will accelerate its digital growth strategy. Following the all-cash transaction, the company is expected to retain its MoneyGram brand, existing leadership team and headquarters. The deal incorporates a "go shop" period expiring on Mar 16, providing MGI a window to solicit better offers. The company canceled the upcoming fourth-quarter and full-year 2021 conference call. 

Benefits

MoneyGram is likely to utilize the acquirer’s payments knowledge and experience in growing the digital business to solidify cross-border capabilities while enhancing its digital platform. The deal is likely to close in the December quarter of 2022, after which Madison Dearborn is expected to refinance MGI’s outstanding debt of $799 million (at fourth quarter 2021-end). The deal is expected to provide robust financial flexibility to MGI, which will support further innovation and transformation.

The move comes at a time when the global economy is witnessing rapid recovery from the COVID-induced downturn. Cross-border transactions are expected to grow in the coming days due to rising international trade, while competition in the remittance space is likely to ramp up. As such, the acquisition can be beneficial for the company as it can expand its capabilities, competitiveness and financial strength.

Growing Competition

The payment space is currently seeing rising competition from a large number of companies such as PayPal Holdings, Inc. (PYPL - Free Report) , Mastercard Incorporated (MA - Free Report) and The Western Union Company (WU - Free Report) that are investing heavily to enhance cross-border capabilities.

PayPal offers domestic and international person-to-person payment facilities with the help of PayPal and Xoom products. The company continues to gain solid traction in the global online payment market. In the Asia-Pacific region, PYPL is expanding its presence via growing operations in Australia, Philippines and other countries. PayPal enables customers to send payments in more than 200 markets globally.

Mastercard has partnered with global financial technology (FinTech) startup Jeeves to launch the first physical card in Mexico, which will enable clients to pay in any currency wherein Mastercard is operating. MA’s deal with Jeeves will provide clients with easy solutions, cashback opportunities and secure cross-border transactions. The move will boost its presence in the Latin American market, wherein it has made several deals in the past few months.

Western Union has boosted its decade-old relationship with Japan’s Seven Bank through a tenure extension. The move solidifies Western Union’s commitment to enable customers to connect to more than 200 countries and territories. It provides multi-channel capabilities to clients across retail and digital channels, which offer them various money transfer options. The tenure extension is expected to enhance the value of WU’s massive global financial network that works with more than 130 currencies.

Price Performance and Zacks Rank

MoneyGram’s shares have risen 13.6% in the past year compared with a 9.2% increase of the industry. The company currently has a Zacks Rank #3 (Hold).

Zacks Investment Research
Image Source: Zacks Investment Research

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Mastercard Incorporated (MA) - free report >>

The Western Union Company (WU) - free report >>

PayPal Holdings, Inc. (PYPL) - free report >>

Published in