By JASON GERTZEN

The Kansas City Star

After their initial $1.65 billion offer for MoneyGram International Inc. was rebuffed, Euronet Worldwide executives said Thursday that they would consider a proxy fight in pursuit of the company.

MoneyGram, the second-largest money-transfer company, has been poorly managed and decimated by a “reckless investment strategy,” but holds great growth promise if combined with Euronet’s bustling business, Mike Brown, chairman and chief executive, told Wall Street analysts.

“MoneyGram’s senior management has been putting shareholders at risk for years,” said Brown, whose Leawood company is the third-largest specializing in money transfers, ATM networks and other electronic financial transactions.

Executives for MoneyGram, which is based in the Minneapolis area, later acknowledged receiving Euronet’s unsolicited offer and said they were willing to talk under certain conditions. The company already is in discussions with potential investors about financing for a business unit.

A spokeswoman declined to address comments about MoneyGram’s management.

Shares of the two companies swung in sharply different directions after Euronet disclosed its takeover intentions in a filing with the Securities and Exchange Commission.

Euronet sent a letter to MoneyGram earlier this month proposing to give 0.61 shares of Euronet for each MoneyGram share, an all-stock deal that at the time it was proposed would have provided a 43 percent premium at $20 a share.

MoneyGram shares previously had been in decline, dropping 52 percent so far this year. They surged on the news and closed at $17.27, up $2.37. Euronet shares plunged, closing down $4.03 at $28.54.

Euronet executives made the case to investors that the combination of MoneyGram and Euronet would create a “powerful new global player.” They would have a network of more than 200,000 locations around the world and 6 percent of a $269 billion market, according to calculations Euronet cited.

Western Union would remain at the top of the industry with a market share estimated at 16 percent.

Brown and other senior Euronet executives touted their vast experience with wide-ranging international operations and integrating a total of 17 acquired companies. One of those major acquisitions was Ria Envia Inc., which added the then-third-largest money transfer company to Euronet’s business in a $490 million cash-and-stock transaction.

Brown said he was confident about reaping at least $85 million in benefits from a combined company after cutting costs by $36 million and increasing sales to bring a $49 million boost to profits after certain adjustments. The company would be able to tap the power of MoneyGram’s brand, rely on Euronet’s expertise in emerging markets and cross-sell services between the two companies.

“We think our proposal is a great opportunity to build value for both Euronet and MoneyGram shareholders,” Brown said.

A wild card in the deal is MoneyGram’s portfolio of securities linked to subprime mortgages and other investments that have been responsible for hundreds of millions of dollars in losses. The company still is tallying the full extent of its investment troubles, a point leading Euronet executives to insist on a closer look at MoneyGram’s finances before making their offer final.

Brown said he was optimistic MoneyGram’s leaders would engage in serious discussions, but Euronet is prepared to press its case through soliciting proxies to influence the makeup of the company’s board.

“I think there is going to be a wake-up call here because you cannot ignore an economic offer like this forever, and shareholders will be listened to whether it is this year or next,” Brown said.

Combining the money-transfer businesses of the two companies would make a lot of sense, said Robert Dodd, an analyst with Morgan Keegan & Co.

But it will be difficult to proceed with the deal if Euronet does not get MoneyGram’s cooperation, he said.

Euronet must analyze the extent of MoneyGram’s investment problems to determine whether an acquisition is worth the risk. Plus MoneyGram has a series of anti-takeover defenses that would hinder a hostile acquisition.

“I give it a pretty low chance if it remains purely hostile,” Dodd said. “It will be very difficult to pull off.”

To reach Jason Gertzen, call 816-234-4899 or send e-mail to jgertzen@kcstar.com.