UPDATE 1-Money transfer company Optimal Payments buys 2 U.S. firms

Tue Jul 1, 2014 9:01am EDT

(Adds details, comments from analysts, CEO; updates share price)

By Aastha Agnihotri

July 1 (Reuters) - Online money transfer company Optimal Payments Plc said it would buy two U.S.-based online payment firms for $225 million to expand its operations in North America, sending its shares up as much as 9 percent.

Optimal said it would buy Santa Ana, California-based TK Global Partners LP for $210 million, with $150 million in cash and $60 million of shares over four years. TK Global is doing business as Meritus Payment Solutions.

Optimal also said it would pay up to $15 million in cash to acquire Los Angeles-based Global Merchant Advisors Inc.

"The businesses diversify Optimal's revenue away from gaming, its largest client, and into native U.S. merchants. They have no exposure to gaming," Canaccord Genuity analysts said in a note.

The analysts said the companies have a proven U.S. sales force. Optimal has been accessing the U.S. market through its Canadian sales team.

Optimal Payments Chief Executive Joel Leonoff told Reuters that the company was keen on expanding into new U.S. geographies through M&As.

"We will continue to look and try and find deals that are immediately accretive to shareholders and bring expansion values to new territories for us," he said.

Optimal Payments, which has a market value of more than $1 billion, received Visa Europe and Mastercard Europe's principal membership earlier this year, allowing it to process credit card payments without paying fees to third parties.

The company said it would fund the acquisitions, which are expected to close in the third quarter, through credit facilities of $150 million from the Bank of Montreal.

The deals would add to earnings immediately.

"Both businesses are U.S. based, a major focus for Optimal given the opening up of that market for their existing businesses, and are across a range of verticals," Barclays Capital analysts said in a note.

The company, which has been expanding its operations in Europe, said in March it would continue to assess merger and acquisition opportunities in the region and the emerging regulated U.S. gaming market.

Optimal Payments reported in April a jump in pretax profit for 2013 as sales soared in its high-margin Neteller e-wallet business, which helps online gamblers deposit money before playing games.

Shares in Optimal Payments were up about 6 percent at 423.00 pence at 1300 GMT, making the stock one of the top percentage gainers on the London Stock Exchange. (Editing by Gopakumar Warrier)

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