Please ensure Javascript is enabled for purposes of website accessibility

Western Union Reportedly Seeking to Acquire MoneyGram

By Bram Berkowitz – Jun 3, 2020 at 4:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The rumored offer would combine two of the largest money-transfer businesses in the U.S.

Western Union (WU -0.22%) is reportedly courting MoneyGram International (MGI 0.00%) in a takeover bid that would combine two of the largest money-transfer companies in the U.S.

Bloomberg first reported the rumors, citing an anonymous source, who said Western Union has made an offer, but that the target company has not yet decided on its response. News of the potential acquisition sent shares of both companies higher. 

Handshake

Image Source: Getty

Such an acquisition would remove Western Union's chief direct competitor in the U.S. money-transfer space at a time when it faces other threats to its business from digital payments companies such as Paypal (PYPL 1.77%). Bloomberg also reported that traditional money-transfer companies are facing increased regulation, as well as a persistent and growing desire among government officials around the world to legislate cuts to money transfer fees. 

A leader in global payment services, most of Western Union's business involves money transfers from one consumer to another,  collecting fees on every transaction. A large portion of those are international transfers -- the company operates in more than 200 countries and territories.

MoneyGram similarly makes most of its revenue through money transfer and bill payment, but says it primarily serves unbanked and underbanked customers who have less access to traditional financial services. It had more than $877 million in debt at the end of the first quarter after reporting a net loss of $21.5 million, which was more than the $13.5 million loss the company reported in Q1 2019.

The coronavirus pandemic has not helped MoneyGram either. Like other payments businesses, it reported an 18% drop in global money transfer transactions between March 15 and the end of March on a year-over-year basis.

As of the close of trading Wednesday, Western Union had a market cap of roughly $9.47 billion, while MoneyGram's was about $213 million.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Western Union Company Stock Quote
The Western Union Company
WU
$13.45 (-0.22%) $0.03
MoneyGram International, Inc. Stock Quote
MoneyGram International, Inc.
MGI
$10.38 (0.00%) $0.00
PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$85.75 (1.77%) $1.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.