The sources said a deal could give Western Union a $500 million boost, and that the institution plans to start discussing a sale with potential buyers in a few weeks. They noted, however, that Western Union has not definitively decided to sell its business payments unit and that its plans remain confidential.
The unit provides small- and medium-sized businesses (SMBs) with cross-border supplier payment services, enabling those companies to pay vendors in their local currencies to mitigate against foreign exchange risk and fees.
Western Union said via a spokesperson that it does not comment on M&A speculation. Previous comments from Western Union Chief Financial Officer Rajesh Agrawal, however, suggested the institution is considering M&A for its business payments unit.
“We certainly need to evaluate other potential opportunities for that business,” Agrawal said of the unit during a banking conference presentation. Reports did not indicate when the conference occurred. “Our goal really is going to be to maximize the value of that business, whether it’s in our hands or someone else’s.”
In response to reports, shares rose by more than 3 percent on Wednesday, leading Western Union to reach a market valuation of $8.6 billion.
According to reports, the business payment operations have become burdensome for Western Union following corporate tax changes that affect the finances of U.S. businesses in their overseas operations. Western Union relies significantly on foreign cash to provide its cross-border business payment services, reports noted, citing the financial institution’s (FI’s) annual report.
A drop in sales projects led Western Union to decrease the value of the business payments unit, while the FI also paid $464 million in last year’s fourth quarter as a “goodwill impairment charge,” reports said. It marked Western Union’s first annual loss since it separated from First Data more than a decade ago.
Western Union previously bolstered its corporate payment capabilities through the acquisition of Custom House for $370 million in 2009, as well as the takeover of the Travelex business payment operations for $976 million in 2011.