Ant Financial bid for MoneyGram torpedoed in US
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ANT Financial’s plan to acquire the American money transfer company MoneyGram International has collapsed.
A government panel in the United States rejected the plan over national security concerns, the most high-profile Chinese deal to be torpedoed under the administration of US President Donald Trump.
The US$1.2 billion deal’s failure represents a blow for Jack Ma, executive chairman of Chinese Internet conglomerate Alibaba Group, who owns Ant Financial together with Alibaba executives. He was looking to expand Ant Financial’s footprint amid domestic competition from rival Tencent’s WeChat payment platform.
Ant Financial and MoneyGram jointly announced the termination of the proposed takeover on Tuesday, after the Committee on Foreign Investment in the US rejected their proposals to mitigate concerns over the safety of data that can be used to identify US citizens, according to sources familiar with the confidential discussions.
“Despite our best efforts to work cooperatively with the US government, it has now become clear that CFIUS will not approve this merger,” MoneyGram Chief Executive Alex Holmes said.
The news comes almost a year after Ma met Trump, promising to bring a million jobs to the US. The personal relationship did not sway the Trump Administration. The US government has toughened its stance on the sale of companies to Chinese entities, at a time when Trump is trying to put pressure on China to help to tackle North Korea’s nuclear ambitions and be more accommodative on trade and foreign exchange issues.
The MoneyGram deal is the latest in a string of Chinese acquisitions of US firms that have failed to clear CFIUS, including the US$1.3 billion purchase by China-backed buyout fund Canyon Bridge Capital Partners of US chipmaker Lattice Semiconductor.
In November, China Oceanwide Holdings Group and Genworth Financial Inc extended a deadline to April 1 for the Chinese group’s planned US$2.7 billion takeover of the American life insurer.
In response to a question about the deal, Chinese foreign ministry spokesman Geng Shuang yesterday said cooperation on economic and trade matters was of mutual benefit.
“We hope the US can create a fair and predictable environment for Chinese enterprises to invest and start up businesses,” Geng added.
In a commentary, Xinhua news agency described a fading bonhomie between the two countries, with the US “stuck in a zero-sum mentality.”
China and the US “are about to ride a bumpy journey in trade in 2018 if the US government goes its own way, and retaliatory measures by China could be on the table,” Xinhua said.
The MoneyGram deal’s demise is also the latest example of how CFIUS’ focus on cyber security and the integrity of personal data is prompting it to block deals in sectors not traditionally associated with national security, such as financial services.
The US Treasury said it is prohibited by statute from disclosing information filed with CFIUS and declined to comment on the MoneyGram deal.
Other US financial services deals by Chinese firms are waiting for approval from CFIUS, including HNA Group’s acquisition of hedge fund-of-funds firm SkyBridge Capital from Anthony Scaramucci, the Trump administration’s former communications director.
Dallas-based MoneyGram has approximately 350,000 remittance locations in more than 200 countries and regions. Ant Financial was looking to take over MoneyGram not so much for its US presence but to expand in growing markets outside China.
Ant Financial and MoneyGram said they will now explore and develop initiatives to work together in remittance and digital payments in China, India, the Philippines and other Asian markets, as well as in the US. This cooperation will take the form of commercial agreements, one of the sources said.
Any arrangements reached by Ant Financial and MoneyGram that do not involve a transaction would not be subject to review by CFIUS.
“What is more likely to happen at this point is that MoneyGram will sell to another company, and one company that has shown interest in the past is Euronet,” said Gil Luria, an equity analyst at D.A. Davidson & Co.
Ant Financial agreed an US$18 per share all-cash deal to acquire MoneyGram in April, seeing off competition from US-based Euronet Worldwide, which had made an unsolicited offer for MoneyGram and openly lobbied US lawmakers, saying Ant’s proposal created a national security risk.
Ant Financial said it paid MoneyGram a US$30 million termination fee for the deal’s collapse.
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