July 5, 2011 / 1:21 PM / in 7 years

Western Union to buy Travelex unit for about $970 million

BANGALORE (Reuters) - Western Union Co (WU.N), the world’s largest payment transfer company, said it agreed to buy Travelex’s Global Business Payments division for about 606 million pounds ($968.7 million), to expand its international business payments services.

The transaction, Western Union’s first major deal since Hikmet Ersek took over as CEO last year, is expected to boost the company’s global business payments segment, which contributed 14 percent of the company’s overall revenue last year.

“The acquisition of Travelex Global Business Payments provides our business-to-business operations immediate scale, further geographic reach, additional customer opportunities, and added product capabilities,” Ersek said on a conference call with analysts.

The deal is expected to hurt Western Union’s GAAP earnings per share by about 2 cents in 2011 and by about 4 cents in 2012 due to deal and integration costs and non-cash amortization expenses -- but is expected to be cash accretive in 2012.

However, Western Union reaffirmed its previously announced outlook for 2011.

Private equity firm Apax Partners -- which bought a majority stake in Travelex Holdings in 2005 for about $2 billion -- will maintain its stake in the company after the deal, a person familiar with the matter told Reuters.

Western Union Business Solutions and Travelex’s Global Business Payments division are expected to have a combined revenue of $400 million in 2012.

    “The combination of our existing Western Union Business Solutions with Travelex Global Business Payments gives us access immediately to 16 countries,” Ersek told Reuters by phone.

    The transaction, expected to close in late 2011, will be funded by Western Union’s existing cash balances.

    Travelex Global Business Payments conducts business payments annually for 35,000 customers, and is expected to post 2011 revenue of 150 million pounds, Western Union said.

    Western Union’s shares were down about 3 percent at $19.59 in morning trade on Tuesday on the New York Stock Exchange.

    ($1 = 0.626 British Pounds)

    Reporting by Brenton Cordeiro; Editing by Sriraj Kalluvila

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