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Currently, Western Union and MoneyGram are in talks on the buy offer, but no decision has been made yet. Following the rumors, both Western Union and MoneyGram stocks have soared. WU stock is over 8% up while MGI has managed to gain over 38% in the pre-market.
American worldwide financial services and communications company Western Union (NYSE: WU) has made an offer to buy MoneyGram International Inc (NASDAQ: MGI), another U.S. provider of money transfer services. If completed, the deal will unite the biggest money-transfer companies and rescue MoneyGram that has been in a state of decay lately.
MoneyGram in Trouble
MoneyGram leverages its modern, mobile, and API-driven platform and collaborates with the world’s leading brands to serve millions of people each year through both its walk-in business and its direct-to-consumer digital business. The company has over 350 thousand agents globally. In addition, it is one of the major partners of Ripple that has been providing significant financial support to the company. In 2019, Ripple invested $50 million in MoneyGram and became the owner of 9.95% of the outstanding MoneyGram common stock. Then, another $11 million input followed, expanding the companies’ partnership.
Strong ties between Ripple and MoneyGram are explained by the latter using XRP tokens for its on-demand liquidity product in international payments. However, it was not enough to keep running smoothly in time of the pandemic. Although MoneyGram saw a 75% increase in digital transactions in April, its first-quarter revenue of $290.9 million declined by 8% in contrast with Q1 2019. Notably, in Q1 this year, digital money transfers made up 18% of all transactions, which is not the best rate.
Northland Securities analyst Michael Grondahl said:
“Since MGI was recapitalized in 2008 (due to bond portfolio implosion) they have continued to tackle many internal and external issues, we believe this continues to be a long journey with a high gross debt level of ~$909M and weak cash flows.”
Currently, Western Union and MoneyGram are in talks on the buy offer, but no decision has been made yet. When reached for comment, both the companies declined to comment. Western Union said it “does not comment on market rumors regarding mergers and acquisitions.”
Western Union and MoneyGram Stocks Up in Pre-Market
Following the rumors, both Western Union and MoneyGram stocks have soared.
Western Union stock closed at $20.71 yesterday but rose almost 7% in extended trading. In the pre-market today, it is 8.40% up, making up $22.45 per share. BTIG’s analyst Mark Palmer has a bullish buy rating on the WU stock. His price target is $28, or 35% upside potential. His opinion is based on separate valuations for the company’s traditional money transfer business and its rapidly growing digital business.
As for MoneyGram, its shares have also jumped. On Monday, MG stock added 6.15% to end with a $2.59 price. This gave the company a market value of about $164 million. After hours, MoneyGram saw its stock surge by 28%. At the moment of writing, it is trading at $3.59. It has skyrocketed by 38.61%.
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