The booth of Ant Financial, a finance arm of Alibaba Group Holding Ltd, at an Internet finance expo in Hangzhou in Nov 2015. (PHOTO / CHINA DAILY)
A US government panel rejected Ant Financial's
acquisition of MoneyGram International Inc over national security concerns, the
companies said on Tuesday, the most high-profile Chinese deal to be torpedoed
under the administration of US President Donald Trump.
The US$1.2 billion deal is the most high-profile Chinese transaction to be torpedoed under Trump's administration
The US$1.2 billion deal's collapse represents a blow for Jack Ma, the
executive chairman of Chinese internet conglomerate Alibaba Group Holding Ltd,
who owns Ant Financial together with Alibaba executives. He was looking to expand
Ant Financial's footprint amid fierce domestic competition from Chinese rival
Tencent Holdings Ltd's WeChat payment platform.
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Ma, a Chinese citizen, had promised Trump in a meeting a year ago that he would create 1 million US jobs.
MoneyGram shares were down 8.5 percent at US$ 12.06 inafter-market trading.
The companies decided to terminate their deal after the Committee on
Foreign Investment in the United States (CFIUS) 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 in a statement.
A standard CFIUS review lasts up to 75 days, and the companies had gone
through the process three times in order to address concerns. Additional security
measures and protocols that the companies suggested failed to reassure CFIUS,
the sources said.
"US Treasury is prohibited by statute from publicly disclosing
information filed with CFIUS. CFIUS reviews focus on national security concerns
and Treasury takes the role as chair of CFIUS very seriously, to ensure that
CFIUS identifies and addresses any national security concerns posed by such
foreign investment," a US Treasury spokesman said.
In this undated photograph, a pedestrian passes Western Union Co and MoneyGram International Inc money transfer stores in Athens, Greece. (PHOTO / AGENCIES / Chinadaily.com.cn)
The MoneyGram deal is the latest in a string of Chinese acquisitions of
US companies that have failed to clear CFIUS.
They include China-backed buyout fund Canyon Bridge Capital Partners LLC's US$1.3 billion acquisition of US chip maker Lattice Semiconductor Corp, China Oceanwide Holdings Group Co Ltd's US$2.7 billion acquisition of US life insurer Genworth Financial Inc and Chinese buyout firm Orient Hontai Capital's US$1.4 billion acquisition of US mobile marketing firm AppLovin.
FINANCIAL SERVICES DEALS
Other US financial services deals by Chinese firms are waiting for
approval from CFIUS, including HNA Group Co's acquisition of hedge fund-of-funds
firm SkyBridge Capital LLC from Anthony Scaramucci, the Trump administration’s
former communications director.
MoneyGram has about 350,000 points of remittance in more than 200 countries. Ant Financial was looking to expand in growing markets beyond China
Skybridge and HNA did not immediately respond to requests for comment on what impact they believed the blocked MoneyGram deal would have on them.
Dallas-based MoneyGram has approximately 350,000 remittance locations
in more than 200 countries. Ant Financial was looking to take over MoneyGram not
so much for its US presence but to expand in growing markets outside of
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 United States. This
cooperation will take the form of commercial agreements, one of the sources
said.
CFIUS only reviews mergers and acquisitions, so any arrangements
reached by Ant Financial and MoneyGram that do not involve a transaction would
not be subject to its review.
Ant Financial clinched an US$18 per share all-cash deal to acquire
MoneyGram in April, seeing off competition from US-based Euronet Worldwide Inc,
which had made an unsolicited offer for MoneyGram and openly lobbied
US lawmakers, saying Ant's proposal created a national security risk.
A Euronet spokesman did not immediately respond to a question about
whether Euronet would return with a new offer for MoneyGram.
Ant Financial said it paid MoneyGram a US$30 million termination fee for
the deal's collapse.
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