JPM: Surprising News That WU Could Buy MGI

In a report published Wednesday, JP Morgan analysts maintained an Overweight rating on

, after a Bloomberg report unexpectedly mentioned that the company was in preliminary acquisition talks with

(rated Underweight). "This news comes as a surprise to us considering antitrust regulators objected to such a combination twenty years ago, but we acknowledge the competition set has changed since then. Fundamentally, if confirmed, this would be the #1 money transfer provider buying #2, but synergy potential is complicated by whether or not WU were to retain the MoneyGram brand (and lower prices) and taxes, but there would be synergy with compliance and G&A Expenses," the analysts stated. MoneyGram was sold in 1995 by its owner First Data to satisfy a condition set by anti-trust regulators for the purchase of First Financial Management (the owner of Western Union) at that time. Analyzing the potential deal's impact on MoneyGram's future earnings, the analysts mentioned, "Our back of the envelope analysis shows potential for EPS accretion to WU if a deal was consummated at after-market indications of MGI ($10-11), but dilution is possible if the price paid crossed ~$20."