Kent Kwan

OzForex just announced that it has received a takeover proposal from Western Union at $3.50 – $3.70 per OzForex share. This values OzForex at up to $888 million or the equivalent of nearly 33x market forecast earnings for FY2016. When OzForex floated two years ago at $2.00 per share, it was valued at 22x forecast earnings. Even at that price, many in the market were worried it was a very expensive valuation. So why would Western Union be prepared to pay cash to potentially takeover OzForex at a 50% higher earnings multiple compared to the time of the IPO? More importantly, what should we look for to find the next OzForex for investment? Read more at this (VIEW LINK)



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Patrick Poke

For me, one of the reasons I was willing to pay what looked to be a high PE was OFX's wonderful ROE, and its ability to grow earnings with relatively small investment. This of course would largely be because of the qualitative factors you've discussed here. Even at this price it does appear to be a good buy for Western Union, a lot of buyouts and mergers talk about synergies, but here it looks to ring true.

Kent Kwan

I certainly agree with that. Successful innovation normally leads to great ROE and ROIC. A very sensible move by Western Union.