Zacks_Analysts' Blog : MoneyGram Prices Secondary Offering - Analyst Blog

On Friday, MoneyGram International Inc. (MGI) announced a secondary offering of 9.25 million shares that were owned by investors of private equity firm Thomas H. Lee Partners and investment bank Goldman Sachs Group Inc. (GS) under the recapitalization program, which was initiated during the second quarter of 2011.

Accordingly, the secondary share issue is priced at $16.25 per share, which was its last trading price, taking the share offering to about $150.3 million. Additionally, the underwriters of the stock offering, including Goldman Sachs, have been granted an option to buy an additional about 1.4 million shares within the next 30 days of the share offering.

However, MoneyGram will not receive any part of the booty from the share issue. Meanwhile, the secondary share issue was commenced after the culmination of the reverse stock split that was announced earlier last week.

The reverse stock split enabled MoneyGram to contract its shares outstanding by issuing one share for every 8 shares without altering the market price of these 8 shares. The market value of the total market capitalization remains the same by this method.

Besides, MoneyGram has appointed Morgan Stanley (MS), Goldman, Sachs & Co., BofA Merrill Lynch of  Bank of America Corp. (BAC), J.P. Morgan of JP Morgan Chase & Co. (JPM) and Wells Fargo Securities (WFC) as the book running managers for the secondary stock offering, while  William Blair & Company, Morgan Keegan and Piper Jaffray are co-managers.

Earnings Review

Overall, MoneyGram continues to grow by revamping its balance sheet and capital position, while also exploring new growth avenues in untested locations. As a result, the company reported third-quarter 2011 earnings per share of 3 cents, in line with the Zacks Consensus Estimate but significantly higher than the loss of 30 cents in the year-ago quarter.

Higher money transfer transaction volumes and higher fee and other revenue drove the top line, while absence of preferred dividend payouts, lower tax and interest expenses helped the bottom line. However, these were partially offset by lower investment income and higher operating expenses.

For the fourth quarter of 2011, the Zacks Consensus Estimate is currently pegged at 32 cents, up by a whooping 112% from the prior-year quarter. For 2011, earnings are expected to be $1.09 per share, escalating about 111% over 2010. MoneyGram carries a Zacks #1 Rank, which translates into a ‘Strong Buy’ recommendation over the short term.

On Friday, the shares of MoneyGram closed at $16.25 per share, down 4.6%, on the New York Stock Exchange.