Western Union Co. is seeking to significantly expand its business payments operations by acquiring a Canadian foreign exchange specialist.

The deal announced Thursday for Custom House Ltd. of Victoria, British Columbia, could open an important new market for the Englewood, Colo., company: handling the international payments of small and midsize importers to their global supplier networks.

"This really diversifies our client base," said Ranjana Clark, who joined Western Union a month ago as the executive vice president of its global payment unit, overseeing the company's global strategy.

Western Union is best known as a consumer-to-consumer remittance company; such payments accounted for 84% of its $1.2 billion of first-quarter revenue, dwarfing the 14% that came from its business payments unit, primarily from handling consumer bill payments.

But Western Union clearly sees great potential in adding business-to-business payments to that unit, which it has renamed Western Union Global Payments and put under Clark's direction.

Offering business-to-business payments services is "a whole new product offering," said Clark, who was the chief marketing officer at Wachovia Corp. before Wells Fargo & Co. bought it last year.

Western Union said it would pay $370 million in cash for Custom House, which is on track to generate $100 million of revenue this year.

The deal is expected to close next quarter. It will trim about a penny a share from Western Union's earnings this year and lift its revenue less than 1% from the outlook it reaffirmed last month, the remittance company said.

Clark said Western Union plans to focus initially on the seven core countries of Custom House's operations: Canada, the United States, the United Kingdom, Italy, Australia, Singapore and New Zealand. "Pretty quickly thereafter" Western Union would use its global reach and resources to look at other markets in Western Europe and Asia.

China and India represent "very significant incremental revenue opportunities," she said, and even in Custom House's established markets, such as the United States, the growth potential is significant.

Custom House only recently received licenses to provide money transfers in New York and Texas, and it is not yet licensed to do so in California, she said. "The U.S. could almost be treated as a new market for them."

Founded in 1992, Custom House has nearly 40,000 customers, whose average transaction is about $25,000, Western Union said. Custom House, which concentrates on international payments for small and midsize businesses, describes itself as North America's largest nonbank foreign exchange company and one of the world's largest.

It is currently owned by Peter Gustavson, its chairman and founder, and the Boston private-equity firm Great Hill Partners, which made a "substantial equity investment" in the company in 2006, according to Custom House's Web site.

Custom House's revenue has been growing about 20% a year for the past three years, Western Union said.

The payments company's central capability is managing foreign exchange for midsize clients that may not have currency trading expertise in-house, Clark said. "This is precisely the value proposition."

Payers can initiate transactions online, over the telephone or through Custom House branch offices, funding the payments with wire transfer, direct debit or check, Clark said.

"Think of it as an online cash management product," she said

Though Western Union said it has not developed a detailed marketing strategy for promoting the new service, Clark said Custom House's capabilities might be attractive to small and medium enterprises doing business with American banks.

"I think this can be a complement to our banking channel strategy," Clark said. "Some may want to partner to provide a product as robust as this to the SMEs that they serve."

Aaron McPherson, the research manager of payments at International Data Group Inc.'s Financial Insights, said the deal looks like a natural extension of the work that Western Union does now and builds on its existing network that routes bill payments to companies.

"It seems to be very much aimed at the small and medium business that needs to make an occasional international payment," McPherson said.

Custom House's account-to-account payments capability could be a worthwhile addition to Western Union's and could attract new exporter customers, McPherson said. "It gives them an alternative to accepting cards for payments."