One of last year’s most compelling acquisitions was MoneyGram‘s merger with Ant Financial, an affiliate of Alibaba controlled by its founder, Jack Ma. Ant Financial agreed to buy the world's second largest American remittance company - MoneyGram - for $18 per share.
However, at the beginning of 2018, these two companies suddenly announced that, the obstruction of the US regulatory authorities led to the termination of this acquisition. Therefore, Ant Financial will pay a $30 million termination fee for the breakup of the deal.
According to CNBC, negotiations between two sides was already completed in April 2017. The global market showed great interest in this merger at the time. On the one hand, the global remittance channel of MoneyGram will help Ant Financial build a global cross-border network. On the other hand, the integration of remittance and digital payment markets will provide better remittance services for both Chinese and American consumers.
The US Foreign Investment Committee rejected this merger since the US congressmen expressed concerns about the potential threat to the national security of America, including the personal information disclosure of the US citizens. Once after the announcement of rejection, the share price of MoneyGram fell by almost 9% overnight (3rd Jan, 2018). Even though Ant Financial already guaranteed that the infrastructure used for data processing will stay in the US and personal information will be encrypted and kept in America’s security facilities, this statement still failed to convince the US Congress.
In fact, the development of mobile payment in the United States has been unsatisfactory for years. According to iResearch, the scale of Chinese mobile payment has already reached 90 times that in the US. Although it was obvious that the industry of mobile payment needs to be integrated by other outstanding international companies, the United States, is still not willing to weaken its supervision.
Reuters's data show that in 2017, the scale of Chinese acquisition of American businesses has declined sharply. Until the November of 2017, the scale of Chinese mergers and acquisitions in the US was $13.88 billion, compared with the number of $60.36 billion in 2016, which has dropped by more than 70%. In the meantime, industrial reports show that it takes longer period of time for the US regulators to investigate international deals and the uncertainty of results has also increased significantly. According to Washington Post, President Trump is expected to announce more severe punishments for businesses which rely heavily on trading with China this month.
The China’s Foreign Ministry commented that the Chinese government has always encouraged Chinese enterprises to carry out mutually beneficial international cooperation on the basis of compliance with laws and regulations. At the same time, China hopes the US side could provide a fair and predictable environment for Chinese enterprises to invest in the United States.
Some analysts pointed out that it was not easy for Alibaba to accept this failure, as Alibaba has long been looking forward to expanding globally. The uncooperative American government is becoming a main obstacle that Alibaba need to tackle with. However, it is worth mentioning that after the cancellation of mergers and acquisitions, Alibaba and MoneyGram will still keep their strategic business partnership in order to expand and improve the global remittance and digital payment service of both partners. In this way, while Ant Financial won't have a direct ownership relationship with MoneyGram, they still look forward to working closely with the MoneyGram team to make their platform even more accessible.