Euronet Worldwide Inc. says its proposed hostile takeover of MoneyGram International Inc. would create a remittance powerhouse, and some analysts concur.
Euronet, a Leawood, Kan., electronic funds processor that owns the money transmitter Ria Envia Inc., disclosed its unsolicited $1.65 billion bid for MoneyGram, of Minneapolis, on Thursday.
In a conference call with investors, Michael J. Brown, Euronet's chairman and chief executive, said the deal would "create a powerful global player in the money transfer business." There is little overlap between MoneyGram's agents and Ria Envia's, Euronet said, and the combined company would have Euronet's expertise in emerging markets and MoneyGram's brand and much larger network.
Gwenn Bezard, a research director at Aite Group LLC in Boston, said that combining MoneyGram with Ria Envia "would amount to a pretty significant competitor for" Western Union Co., the world's largest transmitter with about a 16% market share. (MoneyGram has about a 4% share of the global market, and Ria Envia 2%, making them the second- and third-largest players, respectively, according to Euronet.)
Mr. Bezard said MoneyGram could also apply Euronet's expertise as a funds processor to its struggling bill payment systems unit. However, Mr. Brown said Thursday that Euronet would consider selling the unit, as well as expanding it outside the United States. Last quarter, revenues from the unit grew only marginally, and in October the company began a strategic review of this business.
At $20 a share, the takeover offer would give MoneyGram stockholders a 43% premium over the closing price on Dec. 4, when Euronet submitted the bid. Euronet said MoneyGram had rejected an initial proposal last month to discuss a deal confidentially. In a press release issued Thursday, MoneyGram said it was willing to confidentially discuss a second, written proposal provided by Euronet this month, but that Euronet refused to do so.
MoneyGram also said it had entered talks with investors about its bill payment business but warned that additional losses in its securities portfolio could force it to revise its earnings projection for 2007.
Mr. Brown said Euronet was "determined to complete this transaction" and "willing to take all necessary steps" to make it happen, including a possible proxy battle. Four of MoneyGram's 11 board members will come up for re-election in May, he noted. "We might not get all of them, but I believe there is going to be a wake-up call."
In the Dec. 4 offer letter, Mr. Brown said that buying MoneyGram would increase Euronet's profits by a double-digit amount beginning next year. If warranted, Euronet also said, it would consider a higher bid after due diligence.
MoneyGram's problems related to bad mortgage investments may have given Euronet the opening to make a hostile bid.
In October, MoneyGram said it had been forced to write down $230 million of securities and draw an additional $20 million from its credit lines. Last month, Moody's Investors Service Inc. downgraded MoneyGram to junk status because of doubts about subprime assets in its portfolio.
Euronet said it is ready to create an interim financing facility for MoneyGram and has more than $250 million of cash and access to more capital if needed by MoneyGram.
Euronet, which also operates automatic teller machines and prepaid mobile payment systems, bought Ria Envia in April for $490 million.
Shares of MoneyGram were up about 16% in afternoon trading Thursday.
