Victoria currency exchange house sold to Colorado company for US$370 million

Colorado-based Western Union is acquiring Victoria-headquartered Custom House Ltd., an international payment provider, for US$370 million.

Christina Gold, president and CEO of Western Union, said, "Custom House is a dynamic business and has a significant customer base in the cross-border payments market, which generates strong margins and cash flow."

Founded in 1992 by Peter Gustavson, Custom House grew from a single retail currency exchange outlet in Victoria's Inner Harbour to become a global currency exchange services for small and medium-sized businesses (SMEs) in North America, Europe and the Asia Pacific.

It now serves almost 40,000 customers worldwide and has 630 employees. It's on track to generate US$100 million in annual revenue from customers primarily in Canada, the U.S., the U.K., Italy, Australia, Singapore and New Zealand.

The company has generated double-digit growth since its inception 17 years ago. In its first two months of operation at its Government Street outlet, Custom House rang up $35,000 in profit (see BIV's Peter Gustavson profile issue 590; February 13-19, 2001).

Revenue has increased 20% a year for the past three years as the average size of each transaction grew to roughly $25,000 each. With its multi-channel payment system and its own web-based payment system, the company can provide currency exchange services in more than 120 countries.

Western Union's Custom House acquisition will help it expand its presence in the SME payment market and give it access to new growth market.

Gustavson said he was "excited about the increased potential that will come with leveraging our collective resources."

The deal, which is subject to regulatory approvals and other customary closing conditions, is expected to close in 2009's third quarter. It will be funded by Western Union's international cash on hand.

Currently owned by Gustavson and Boston-based private equity firm Great Hill Partners, Custom House will become part of Western Union's global payments division. It will continue to operate under its management team in Canada.

JP Morgan Securities Inc. acted as financial adviser to Western Union. Financial Technology Partners LP acted as adviser to Custom House.