Any $1 billion corporate merger is bound to turn heads, but when a bankrupt company commands that sort of price tag, it's enough to cause whiplash.

But $1.2 billion is the amount First Financial Management Corp. of Atlanta will spend for the money-transfer operations of Western Union, which were auctioned off by a bankruptcy court in September. Western Union had been owned by New Valley Corp. of Paramus, NJ., and FFMC's offer beat competing bids by First Data Corp. of Hackensack, NJ, and New York leveraged buyout specialists, Forstmann Little & Co.

How is it that a company that spent the last 18 months in bankruptcy could be worth so much money? Try $100 million in annual cash flow and a business that's growing at 15% per year for starters, according to Robert Bolen, a securities analyst with J.C. Bradford & Co. in Nashville. Moreover, once Western Union is acquired, the junk-bond interest payments that sank New Valley will be written off and the firm will be debt free.

"Secondarily, if you are in the business that First Financial is in, having the Western Union franchise--which serves the 20% of the population that doesn't have bank accounts--makes sense," says Bolen.

Just what is Western Union's most important business? It isn't telegrams. (Those are--pardon the pun--a dead letter.) What makes Western Union tick are money transfers initiated by low-income, working-class immigrants who send $50 or so to relatives back home in Indonesia, Pakistan, Zaire, wherever. Western Union has no less than a 90% share of this market. First Data has the remainder through its American Express MoneyGram.

FFMC's businesses, on the other hand, include a subsidiary, NaBanco, that processes credit and debit card transactions. Some 50% of FFMC's projected $2 billion in revenue for 1994 comes from this unit, according to a report from Montgomery Securities. Given FFMC's deep involvement in the bank card business, it's ironic that it was the one to wind up winning the Western Union prize. After all, credit and debit cards just about killed the money transfer business, at least for middle- and upper-income individuals.

But the prospect of mixing Western Union with FFMC's existing businesses is an attractive one, says FFMC senior vice president Donald Sharp. He would not describe what form this integration will take, but he said that the two companies "were very similar" in that both processed large numbers of small dollar retail transactions.

Besides NaBanco, FFMC's businesses include Telecheck, which approves checks written at retailers by verifying them against an electronic database, and a credit collection agency, NationWide Credit. Telecheck could pick up revenue from the 24,000 independent agents in the Western Union network.

At any rate, it proves that in an age of high technology networks and electronic banking, there's still plenty of life left in a business that's decidedly low tech.

At the other end of the technology spectrum, Visa International last month purchased half of Payment Solutions Network, a consortium of seven banks and consulting firm J.D. Carreker and Associates that facilitates electronic check presentment between banks. The lack of a network backbone has hindered implementation of ECP, whereby banks clear checks electronically.

By using its VisaNet credit card transaction settlement network to send checks electronically, Visa could provide the large network structure that ECP has lacked. Banks that have used VisaNet for years may be more willing to use ECP than they would have otherwise.

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