Unable to get approval from federal authorities, wire-transfer provider MoneyGram International Inc. and China-based Ant Financial Services Group disclosed Tuesday that they have terminated their merger agreement, almost a year after it was first proposed.
In a joint news release, the firms said they’re bailing on Ant’s plan to acquire MoneyGram “following the inability of the companies to obtain the required approval for the transaction from the Committee on Foreign Investment in the United States (CFIUS), despite extensive efforts to address the Committee’s concerns.” Ant had agreed to pay $880 million for Dallas-based MoneyGram.
CFIUS is an inter-agency panel of federal officials headed by the Secretary of the Treasury that reviews proposed takeovers of U.S. companies by foreign entities. Given MoneyGram’s size—second only to The Western Union Co. in the U.S. wire-transfer market—Ant’s proposed acquisition instantly attracted criticism from skeptics worried about giving a Chinese company a large toehold in America’s financial-services industry through the deal, despite the companies’ repeated assurances that MoneyGram would operate independently.
Soon after Ant’s offer, Kansas-based Euronet Worldwide Inc., owner of the rival Ria money-transfer service, submitted an unsolicited, $1 billion bid for MoneyGram, touting the fact that its plan would not need CFIUS approval. MoneyGram shareholders eventually approved Ant’s revised bid of $1.2 billion.
“The geopolitical environment has changed considerably since we first announced the proposed transaction with Ant Financial nearly a year ago,” MoneyGram chief executive Alex Holmes said in a statement. “Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger. We are disappointed in the termination of this compelling transaction, which would have created significant value for our stakeholders.”
Instead, the two companies said they will work together “on new strategic initiatives in the remittance and digital-payments markets.” Their goal “is to provide their respective customers with user-friendly, rapid-response and low-cost money-transfer services into China, India, and the Philippines, among other Asian markets, as well as in the U.S. and other key regions around the world,” the release says.
Doug Feagin, president of Ant Financial International, said in the release that “establishing this new strategic cooperation with MoneyGram will add a partner with global remittance capabilities to our ecosystem and, while Ant Financial won’t have a direct ownership relationship with MoneyGram, we look forward to working closely with the MoneyGram team to make our platform even more accessible—particularly to unbanked and underserved communities globally—and create even better experiences for our customers.”
Under terms of their merger agreement, an Ant affiliate will pay a $30 million termination fee to MoneyGram.
Besides teaming up with MoneyGram, Ant has been working with merchant acquirers such as First Data Corp. to expand theNorth American presence of its Alipay mobile-payment service at the point of sale.