Shares of the long-running payments company MoneyGram International (MGI) were trading more than 19% higher at 2:02 p.m. ET today after the company announced that it will be acquired by the private equity firm Madison Dearborn Partners.
Madison Dearborn Partners will acquire MoneyGram for $1.8 billion in cash, or roughly $11 per share. Upon closing, the firm will refinance the nearly $800 million of debt that MoneyGram had at the end of 2021. According to the press release, the purchase price represents a roughly 50% premium to MoneyGram's stock price on Dec. 14, the day before rumors about the deal started to circulate in the news media.
"We are excited to enter into this transaction with [Madison Dearborn Partners], which will deliver immediate and compelling value to shareholders and enable us to accelerate the advancement of our digital growth strategy," MoneyGram CEO Alex Holmes said in a statement.
MoneyGram is expected to maintain its brand and continue to be led by Holmes. The deal also includes a "go shop" period for the next 30 days in which it can solicit other offers from companies that might come back with an even better price.
MoneyGram's stock got battered during the Great Recession after investing in risky asset-backed securities that were backed by shaky mortgages. Although the company survived, the stock never bounced back as it faced intense competition from various fintech players and high levels of debt.
Acquisition rumors have been swirling for quite a while, so it's not a huge surprise to see a deal finally come to fruition. The deal puts the value of MoneyGram at a floor of $11 per share, or a roughly $1 billion market cap. That means it trades for less than one times projected revenue in 2021.
Although it seems like the company has fielded plenty of offers at this point, the 30-day shop period could be interesting. Who knows, perhaps other bidders emerge with a larger purchase price, so there is the potential for more upside from here.