Global Payments (NYSE: GPN) shareholders can
breathe a sigh of relief.
The credit card transaction processor has finally found a
buyer for its money transfer business. The sale, long in the
making, essentially amounts to the removal of a
growth-sucking leechfrom the rest of the company.
Pending regulatory approval and license transfers, Global
will sell the money transfer unit to a private equity firm
for a price between $85 million and $110 million, with the
precise amount to be pinned down at closing based on its
operating performance.
As a result, management expects fiscal-year earnings per
share from continuing operations without money transfer to
come in between $2.31 and $2.42. That range is lower by about
5% than originally anticipated. Although the company's stock
has fallen since the announcement, I think the long-run
benefits will more than make up for the short-term pain.
Concentrated focus
While guidance is lower than it was previously, Global
made the right decision in getting rid of the business. In
terms of revenue contribution, the importance of Global's
money transfer segment has been dwindling for some time.
Additionally, the private equity buyers will now assume
the burden of fending off competition from niche monster
Western Union (NYSE: WU), which was arguably
an unwinnable fight from Global's standpoint.
Western Union attracts a
globally diversified revenue stream, which totaled more
than $5 billion in the past 12 months. It has boatloads of
cash on its balance sheet that it can spend toward cementing
its place at the head of the class in money transfer. In
comparison, Global's presence in the industry was more of a
sideshow than anything else, as it did little more than
distract the company from its breadwinning card transaction
processing activities.
That's the way you do it
Global's core business has terminals all over the
world, which allow merchants to accept credit cards and
process transactions from one or many different card
companies. Continued... |