Published: Sat, January 13, 2018
Worldwide | By Isabel Fisher

The US Is Blocking a Chinese Fintech Giant from Buying MoneyGram

The US Is Blocking a Chinese Fintech Giant from Buying MoneyGram

The Chinese financial services giant controlled by Alibaba co-founder Jack Ma abandoned a plan to buy MoneyGram International after failing to win approval for the deal from a key government panel.

Dallas-based MoneyGram, the second-largest money transfer company in the world, was in the process of getting bought by Ant Financial, an affiliate of Chinese conglomerate Alibaba, for $1.2 billion since April. Trump told reporters in the Trump Tower lobby that Ma was a "great, great entrepreneur".

CFIUS, an inter-agency body that reviews acquisitions of USA companies by overseas entities for security implications, had jurisdiction over the deal because Chinese state-backed entities and funds own 15% of Ant.

"The geopolitical environment has changed considerably since we first announced the proposed transaction", Holmes said.

"The regulatory uncertainty will certainly make Chinese buyers further head for other countries such as Germany, the United Kingdom and Israel for foreign assets", said one China-focused M&A lawyer at a global law firm, who did not wish to be named because he was not authorised to speak with the media. A lot of technology companies are becoming increasingly global, so they have to go to the US.

"Despite our best efforts to work cooperatively with the USA government, it has now become clear that CFIUS will not approve this merger", he said. According to a report from Reuters, authorities saw the deal as a recipe for national security concerns, because it would give a Chinese company access to sensitive data that could be used to identify us citizens. They said "extensive efforts" were made to address CFIUS' concerns, according to a statement on Tuesday.

Acquiring MoneyGram would have expanded Ant Financial's market to around 350,000 locations in more than 200 countries. But that said, Ant's home market is China, and thus it might be hard for the company to refuse a request for MoneyGram-based information from Beijing, even if that information were related to its offshore business with no connection to China. Ant also faced a rival bid from Euronet, prompting Ant to boost its offer by 36% to about $1.2 billion.

The company had to submit the proposed merger to CFIUS several times, but failed to allay concerns about the security of United States customers' data. This is the most high-profile attempted acquisition by a Chinese company to be blocked by the White House administration. The Shenzhen-based group previous year bought a 5 percent stake in the USA electric vehicle maker Tesla for $1.8 billion.

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