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Contributors: Douglas McIntyre Jon C. Ogg

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Monday, October 02, 2006

Western Union: One of the Most Quiet Spin-Offs Ever

Last week was the debut of Western Union (WU) on a when-issued basis, and today was the debut of the real stock trading "regular way" on NYSE under the 'WU' ticker.

First Data (FDC) has been in the process of spinning off Western Union (WU) for what seems like an eternity. The street has been expecting this for probably a couple of years, although it was not until recent months that the company was properly shored up and terms were set. WU even set a $3.5 Billion debt financing, and even announced a $1 Billion share buyback plan out to December 31, 2006 before the company even began trading regular way.

The company even warned about WU's earnings earlier in September, and that trimmed off 10% of the value of FDC on the day that was announced. Both companies are now S&P 500 Index members.

Shares of First Data (FDC) are now trading on an ex-WU basis, so the share price down around $23.00 is not exactly representative of that $42.00 close on Friday, September 29, 2006.

There have already been a slew of analyst calls out in front of the Western Union official debut. There were three initiations of coverage this morning with J.P. Morgan at 'Neutral,' William Blair at 'Overweight,' and Thomas Weisel at 'Outperform.' Last week UBS gave WU a 'Neutral" rating; and prior to that Prudential started coverage with a 'Neutral' rating and we saw 'Buy' ratings issued out of both Jefferies and out of Sun Trust Robinson Humphrey.

One of the ongoing issues surrounding Western Union inside the US that with all of the immigration issues afoot in the US, it can have a direct impact on Western Union. The company transfers billions of dollars on a net basis, and it has essentially become the immigrant bank of choice for many.

While the company has essentially 765 million shares outstanding, it is not anticipated that S&P Index investors will have to immediately take any action because shares were distributed directly to First data (FDC) holders as of the September 22, 2006 record date. Perhaps this instant inclusion in the S&P made this one more quiet, but it is still puzzling how this received such a small amount of coverage.

Western Union (and affiliates Orlandi Valuta and Vigo) is the leader in global money transfer that provides people with fast, reliable and convenient ways to send money around the world, pay bills and purchase money orders through a network of over 270,000 agent locations in more than 200 countries and territories.

Jon C. Ogg
October 2, 2006

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