LGB Wires Into Workers’ Wages

Target: Intermex Wire Transfer LLC

Buyer: Lindsay Goldberg & Bessemer

Seller: Rincon Family

Financial Advisor: Seller: Banc of America Securities LLC

Legal Counsel: Seller: Bilzin Sumberg Baena Price & Axelrod LLP

“It’s an industry that’s been seeing a lot of consolidation activity recently,” said Carlos Rincon, president of Intermex Wire Transfer LLC, a money remittance company that agreed to be acquired by the private equity firm Lindsay Goldberg & Bessemer (LGB) earlier this month. LGB will acquire 80% of Intermex, while the Rincon family, which founded the company in 1994, will hold on to the remaining 20 percent.

Rincon said the money transfer industry was hit hard by regulations imposed on it by the USA Patriot Act, which was passed shortly after the Sept. 11, 2001 terrorist attacks. The portion of the Patriot Act that covers financial restrictions, Title III – International Money Laundering Abatement and Anti-Terrorist Financing Act Of 2001, is one of the larger sections of the bill, and enforces penalties that include fines and 25-year prison sentences for financial dealings deemed unlawful.

“It changed the way the way we do business—made it more expensive,” Rincon said. “There is a lot of technology involved now. We are forced to operate under the same ‘know your customer’ guidelines that banks have to use.”

Because compliance with the Patriot Act can carry a lofty price tag, a number of smaller players in the money remittance sector are having a hard time staying in business, thus making them targets for acquisition. Rincon said that Intermex opted to be bought out by LGB to gain the financial wherewithal to acquire the struggling players. “There are a lot of opportunities for us,” he said.

Eighty-percent of Intermex-initiated money transfers go from the U.S. to Mexico, one the largest remittance receivers in the world, Rincon said. In 2004, the remittance corridor between the U.S. and Latin America saw about $30 billion pass through it, of which Intermex’s share was about 4%, or $1.2 billion. The average size of Intermex’s wire transfers is about $350, he added.

“The pie is very big and our slice is very small,” Rincon said, alluding to the growth prospects available in the sector.

Aside from its planned add-on campaign, Intermex has been busy on the organic growth front, too. The Miami-Fla.-based company entered the Texas marketplace a year and a half ago, and just recently received permission to set up shop in California, the number-one market for money transfers from the U.S. into Latin America, Rincon said.

Intermex has more than 230 employees worldwide and is licensed to operate in 26 states in the U.S. and 17 countries in Latin America. Typical Intermex service centers are bullet-proof kiosks located within a neighborhood retail locations, such as a grocery and convenience stores.

Rincon would not discus the financial details of the transaction. Calls placed to LGB were not returned.

New York-based LGB is currently investing out of its $2 billion Lindsay Goldberg & Bessemer LP fund, which it raised in 2002. According to its Website, the firm typically seeks to place between $50 million and $250 million of equity in each investment. —A.N.