WesternUnion has announced a definitive agreement to acquire Canada-basedCustom House, Ltd., a provider of business-to-business internationalpayment solutions for small and medium enterprises. The US $370 millioncash transaction is expected to close in the third quarter 2009,subject to regulatory approvals and customary closing conditions.
The international SME payments market is a large,growing and highly fragmented category. Today, Custom House is on planto generate US $100 million in annualized revenue, primarily fromsenders in seven countries including Canada, the United States, theUnited Kingdom, Italy, Australia, Singapore and New Zealand. Thecompany has built a sizable client base, significant internationalpayment capabilities, a strong network of banking partners and scalableoperations that are poised to capitalize on this opportunity.
CustomHouse’s multi-channel payment solutions include their online platform,which provides reliable web-based payment capabilities to over 120countries worldwide. These strengths will be enhanced by WesternUnion’s globally recognized brand, international footprint andfinancial strength.
Christina Gold, president and chief executive officer ofWestern Union, stated, “Custom House is a dynamic business and has asignificant customer base in the cross-border payments market, whichgenerates strong margins and cash flow. Western Union intends to growthis business by attracting new customers and entering newgeographies.”
Strategic Rationale
The acquisition of Custom House supports Western Union’s strategic plan by:Peter Gustavson, Custom Housechairman and founder, stated, “We are extraordinarily proud of what theCustom House team has accomplished as an independent company and areexcited about the increased potential that will come from leveragingour collective resources.”
- Entering a new growth market and diversifying its product portfolio
- Furthering Western Union’s presence in the SME payment market
- Expanding its customer base
- Building a global line of business
- Establishing strong account-to-account transfer capabilitiesthat complement Western Union’s existing cash-to-cash andaccount-to-cash expertise
Currently owned by Peter Gustavson and the Boston-based privateequity firm Great Hill Partners, Custom House will become part of theWestern Union Global Payments segment (formerly theconsumer-to-business segment) on completion of the transaction, andcontinue to operate under its existing management team in Canada. Foreach of the past nine years, Custom House has been voted one ofCanada’s 50 Best Managed Companies.
Ranjana Clark, executive vice president of Global Payments andGlobal Strategy, stated, “Custom House is a highly complementarybusiness with a proven operating model, seasoned management anddifferentiating technology. Custom House President and CEO Peter Ciceriand his team are known for providing clients with speed, accuracy andworld-class customer service. We look forward to working closely withCustom House as we continue to grow this dynamic business.”
Custom House has been growing revenue at a 20% CAGR over thepast three years. The Victoria-based company has a diverseinternational client base of nearly 40,000 customers with an averageprincipal per transaction of approximately US$25,000. With a strongteam of 630 employees worldwide, Custom House’s multi-channel deliveryand recurring transaction-based business model has significantoperating leverage.
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