Takeover talk sends MoneyGram up sharply

Shares of MoneyGram International rose nearly 16 percent Thursday on news of a hostile takeover attempt by another money-transfer firm, Euronet Worldwide.

Investment analysts predicted a fight for control of St. Louis Park-based MoneyGram that could go on for months and potentially involve the emergence of other suitors.

MoneyGram stock lately had been trading at less than half its 52-week high of $32.24 after taking a $230 million loss on subprime home loans in the third quarter.

The venture into the once-lucrative subprime mortgage business ended up involving more risk than reward for the company, with MoneyGram management warning Thursday that the value of its subprime investments has yet to be calculated. Some analysts estimate that MoneyGram could post write-offs of as much as $500 million in the months ahead.

"Don't stretch for a few extra pennies and put your core franchise at risk," said Robert Napoli, a Piper Jaffray analyst in Chicago. "That's a lesson let's hope they never forget."

MoneyGram, which has about 1,000 employees in Minnesota, in October announced plans to study selling one of its largest business units -- so-called payment systems, which delivered 30 percent of the company's revenue last year. The company is talking with potential investors about ways to shore up its finances, MoneyGram said Thursday in a prepared statement.

"No assurances can be given that any financing alternative will be agreed upon or consummated," it said.

"The offer from Euronet really puts the company in play," Napoli said. "It's going to force MoneyGram sooner rather than later to go to investors about why current management wants to run the company."

Euronet offered to pay for deal with stock, at a price that MoneyGram calculated to be worth $16.75 per share. But MoneyGram initially spurned the offer. Euronet, based in Leawood, Kan., vowed to wage a proxy fight if the two companies don't come to terms.

Euronet had priced its offer at $20 a share Dec. 4, the date it approached MoneyGram. The price of Euronet stock has been on the decline since the initial offer, which was made public this week.

"They saw an opportunity to pick them up cheap," said Brett Horn, an analyst at Chicago-based investment research firm Morningstar Inc.

"Twenty dollars is too cheap. MoneyGram is worth more than that." Horn said he values the company at about $31 a share.