Mid-Am wants to go shopping with you.
The Louisville, Ky., banking company, formally known as Mid-America Bancorp, is selling its sliver of the money order market to focus on its small but growing gift certificate business.
Mid-America this week agreed to sell its money order subsidiary to MoneyGram Payment Systems Inc. for about $15 million in cash. Saddle Brook, N.J.-based MoneyGram, one of the nation's top nonbank money transfer companies, is expected to close the deal in the fourth quarter.
As part of the deal, $1.4 billion-asset Mid-America will retain the part of the money order subsidiary that specializes in issuing and processing gift certificates for shopping malls. Mid-America is spinning off the gift certificate business into a new entity, Mid-America Gift Certificate Co.
Steven Small, Mid-America's chief financial officer, said the $64 million-asset money order business wasn't profitable enough. Mid-America's share of the market-about 1%-was too small to let it be competitive, he said.
"We're fighting with competitors many times our size," he said. "We just felt now was the time to exit that part of the industry."
But Mr. Small said Mid-America, parent of Bank of Louisville & Trust Co., is encouraged by the growth it sees in issuing and processing gift certificates.
Mid-America Money Order Co. has been in business about eight years. But it was only in recent years that it branched into the gift certificate business. Currently, Mid-America supplies gift certificates to several mall owners. The certificates can be used in any store within the mall.
"If you're buying a gift, you don't have to worry about if they want records or clothes or sporting goods," Mr. Small said.
The number of gift certificates issued by Mid-America has grown in the past two years and is expected to grow again this year, according to company statistics. And Mr. Small projected that Mid-America could double its volume in three years. The business still only yields $200,000 to $300,000 of net earnings on an annualized basis.
Mr. Small said many malls issue their own gift certificates. However, that requires much paperwork and some regulatory red tape, so Mid-America is trying to persuade more malls to use it instead.
"We've been able to show them we can do it better for them," Mr. Small said. "We've had a lot of success at it."
Bertram W. Klein, Mid-America's chairman, said the company also hopes to use its technology and processing experience to attract large retail chains as new customers.
A handful of employees from the money order company will be moved into the new gift certificate company. MoneyGram has agreed to retain the remaining 22 people for at least four years.
