Western Union is weighing sale of business payments unit

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Western Union Co. is weighing a sale of its business-payments arm, which could fetch at least $500 million, according to people familiar with the matter.

The money-transfer company is working with a financial adviser to seek buyers for the division, said the people, who asked to not be identified because the matter isn’t public. Western Union plans to begin soliciting potential suitors within weeks, the people said. No decision has been made and Western Union may decide to keep the business, they said.

A representative for Western Union said the company doesn’t comment on specific M&A or divestiture situations, but that it remains open to opportunities that enhance shareholder value.
Shares rose as much as 3.1 percent and traded up 2 percent to $19.15 at 10:35 a.m. in New York on Wednesday, giving the Englewood, Colorado-based company a market value of about $8.6 billion.

The unit for sale helps small and midsize businesses in the U.S. carry out transactions with overseas suppliers in local currencies, to ensure they don’t lose money because of exchange rates. It became a financial burden for Western Union last year because of changes to the tax code affecting payments and profits that U.S. companies make overseas.

Those changes hurt Western Union because it’s relied on its foreign cash to help certain U.S. customers fund international payments, according to its annual report. With that strategy hobbled, Western Union had to write down the value of the business last year due to sharply lower sales projections.

The company booked a goodwill impairment charge of $464 million in the fourth quarter, which forced it to post its first annual loss since spinning off from First Data Corp. in 2006, according to data compiled by Bloomberg.

The charge essentially means that the unit is now worth much less than what Western Union paid for it. The company expanded in business payments through its $370 million purchase of Custom House Ltd. in 2009. Two years later, it acquired Travelex’s business-payments arm for about $976 million.

A Western Union executive indicated that it was open to selling the business-payments unit this month.

“We certainly need to evaluate other potential opportunities for that business,” Rajesh Agrawal, Western Union’s chief financial officer, said during a presentation at a banking conference in Las Vegas, according to a transcript compiled by Bloomberg. “Our goal really is going to be to maximize the value of that business, whether it’s in our hands or someone else’s.”

Bloomberg News
Money transfers M&A B-to-B payments Western Union