Western Union terminated its $500 million agreement to acquire International Money Express (Intermex) on Tuesday, citing final California approval conditions it called unacceptable.

The deal struck last year offered $16 in cash per Intermex share, according to The Wall Street Journal. Neither company must pay the other in connection with the termination, Western Union said.

Why did Western Union abandon the deal?

Western Union said California's Department of Financial Protection & Innovation (DFPI) sent its final conditions on the evening of Nov. 10. Meeting them would have forced significant changes to how the company does business, works with agents and pursues its long-term strategy.

The buyer called the conditions weighty and harmful to its interests, those of its agents and those of investors. It also said California cited no instance of Western Union falling short of its legal duties to prevent fraud and scams, guard against money laundering or give customers even-handed, competitive access.

Western Union announced the decision in a statement from its chief executive. Devin McGranahan, its president and CEO, said he was disappointed the acquisition could not be completed on terms acceptable to the company. He added: “We believe this course of action is in the best interests of the company and its shareholders.”

What did California say the conditions protect?

According to PYMNTS, the DFPI said it designed the conditions to guard against fraud, scams and money laundering and to secure “fair and competitive access to financial services.” The disagreement therefore concerns the scope of California’s conditions, not a cited failure by Western Union to meet anti-fraud, anti-money-laundering or competitive-access obligations.

Where else had the deal cleared?

Western Union said it had approvals from every jurisdiction except California, including. The list was extensive:

• Approvals covering 54 states, territories and foreign countries
• U.S. merger clearance
• Change-of-control filings in the U.K. and Spain

California had granted initial approval on Feb. 11 without conditions, then approved extension requests on April 17 and July 31. Thirteen days after the second extension, the DFPI withdrew its approval, even though Western Union said nothing meaningful had changed in its business or operations.

Western Union’s board ended the merger agreement after reviewing the transaction with legal and financial advisers and management. California stood apart from the otherwise broad clearance, leaving the buyer with a completed approval process that its own regulator had reversed.

How did Intermex respond?

Intermex rejected the termination on Wednesday. Through counsel, it demanded that Western Union do everything required to see the merger through and maintained that it had fulfilled every obligation under the merger agreement.

The target reserved its rights to seek specific performance, which would compel completion, and to hold Western Union liable for substantial damages. With no termination payment due, the immediate contest is whether the merger agreement allows either side to end the deal on these facts.

How did the shares react?

Intermex shares fell 7.4% before the market opened Wednesday, after closing Tuesday at $6.50. The decline reset the stock below the $16 cash proposal and shifted attention from the premium offered to the legal remedies now available to Intermex.

When could the agreement have ended?

According to PYMNTS, Nov. 10 was the contractual outside date, the point at which either party could end the deal. On the earnings call the previous week, McGranahan said the DFPI had provided input and the company was actively working to determine an acceptable path forward.

The DFPI sent the final conditions that evening. Western Union had said the changes would affect its business, agents and long-term strategy, and its board chose termination rather than accept them.

What happens next?

Intermex can pursue specific performance or damages, while Western Union faces no termination payment. For Intermex shareholders, the $16 cash proposal is no longer guaranteed; for Western Union, walking away avoids the required changes but leaves the buyer facing the claim Intermex has reserved.