To firm up its market position in Latin America and the Caribbean, First Data Corp. has agreed to buy Vigo Remittance Corp., the third-largest money transmitter in the United States.
Buying Vigo, of Sunrise, Fla., would add 47,000 agent locations to First Data’s 225,000-location network. At a meeting with investors in Omaha on Thursday, Charlie Fote, the chairman and chief executive of First Data, said Vigo’s network “matches up very well” with where his Denver company needs locations.
There has been a string of remittance-related deals recently. Last month Popular Inc. said it would invest $125 million in Corporacion UBC Internacional SA — a company that, like Vigo, serves Latin America and the Caribbean — and process all payment transactions for UBC’s bank subsidiary, Grupo Cuscatlan, for five years.
Western Union purchased an equity interest in an Italian money transfer agent in January, and Wells Fargo & Co. announced partnerships for sending funds to the Philippines in November and India in December.
First Data would let Vigo keep its name, as it did when it bought another money transmitter, Orlandi Valuta. Colin Wheeler, a spokesman for First Data, said it would retain Vigo’s management.
The deal, which requires regulatory approval, was announced Thursday. First Data, which owns Western Union (the leading transmitter), did not say how much it would pay. Neither side would say when the deal is expected to close.
When an analyst pressed him for financial details, Mr. Fote said, “We don’t do dilutive deals.”
Vigo was founded in 1986 to provide money transfer services to Brazil. It now operates in 47 countries, primarily in Latin America and the Caribbean, and it specializes in Mexican transfers.
Gwenn Bezard, a research director at Aite Group LLC of Boston, said the deal was meant to increase Western Union’s competitive edge in Latin America, particularly in Mexico.
“Western Union’s market share has been flat in the U.S.-Mexico corridor,” which “has become very competitive,” he said. Vigo’s partnership with the large Mexican bank BBVA’s Bancomer should help First Data “bulk up its presence” there.
According to Mr. Bezard, Western Union’s exclusive agreement with Citigroup Inc.’s Banamex, the second-largest bank in Mexico, has backfired, because competing Mexican banks have established remittance networks through other companies.
Analysts say First Data, whose share of the global remittance market is now roughly 13% — larger than any other company’s — would put even more pressure on its remaining competitors, particularly MoneyGram International Inc., once the deal closes.
“MoneyGram has reduced its exposure to the Mexican corridor, but the Latin American market has been among its greatest source of growth,” said David Scharf, an analyst at JMP Securities LLC. “This could put a little more pressure on them.”
Mr. Bezard said that even though Vigo has an estimated global market share of only 1%, the deal “puts some pressure on MoneyGram to shop around” for acquisitions.
But Global Payments Inc.’s DolEx Dollar Express Inc., the fourth largest U.S. money transmitter, would not be an attractive acquisition target for MoneyGram, he said. DolEx has a different business model than the other three major remitters; it uses branches and full-time employees rather than agents who are paid on commission.
“It’s very difficult to marry a branch network and an agent network,” Mr. Bezard said.
Neither First Data nor Vigo would say how the deal came together, but Mr. Scharf said there were probably other bidders. “Vigo was a very attractive asset.”
Cathy Rebuffoni, a MoneyGram spokeswoman, would not discuss potential acquisitions.
Mr. Bezard said Vigo has been growing, but not as rapidly as its owners — Mario Trujillo, its chief executive, and the Boston private equity firm Great Hill Partners LLC — have wanted.
“Vigo is focused only on the Latin American market,” he said. “It would have been difficult for them to get into other regions without significant investment … yet this is a game where it’s all about being global.”
