Ant Financial, the financial technology company controlled by billionaire Jack Ma, stepped up its international expansion by buying U.S. money-transfer service MoneyGram International Inc.
The $880 million transaction, Ant’s second U.S. deal, will connect MoneyGram’s network of 2.4 billion bank and mobile accounts with Ant’s customers. Ant, which was once part of Alibaba, is seeking to expand abroad amid increasing competition from Tencent Holdings Ltd.’s Wechat payment system at home. The MoneyGram deal will further that goal, following recent partnerships with Paytm in India and Ascend Money in Thailand.
“This gives us a very attractive business that’s already quite engaged with a substantial consumer base in the U.S.,” said Douglas Feagin, who runs Ant Financial’s global operations, in a telephone interview. “Remittance is a very important activity and we think this is a great way for us to build a presence around U.S. consumers.”
Ant Financial is offering $13.25 per share in cash, according to a statement Thursday. That’s about an 11.5 percent premium to MoneyGram’s closing price of $11.88 Wednesday. The company will continue to be based in Dallas and operate under its existing brand. MoneyGram lets consumers and businesses send cash to one another, generating revenue from transaction fees and spreads on foreign-exchange rates. Last year, closely held Ant acquired EyeVerify Inc., a Kansas City, Missouri-based company that makes mobile eye-recognition software.
Shares of MoneyGram surged 8.8 percent in New York trading Thursday, the biggest gain since Oct. 28, to $12.92.
Trump Effect
The deal comes at an opportune time for MoneyGram, since a substantial portion of its business could come under pressure from President Donald Trump’s stance on immigration and trade. Many immigrants use MoneyGram to transfer money from the U.S. to their families. Mexico represents about 10 percent of MoneyGram transactions, according to Bloomberg Intelligence. Trump had proposed a plan last year to cut off the remittances that Mexican immigrants living and working in the U.S. send back home.
“We’re hopeful that some of the statements about Mexico and these other things are mostly conjecture,” Alex Holmes, chief executive officer of MoneyGram, said in a telephone interview. “We’re positive on the industry, we’re positive on the growth of our business and how we’re operating around the world.”
The Committee on Foreign Investment in the United States, a Treasury Department agency that reviews foreign purchases of U.S. companies, will probably scrutinize the deal. While CFIUS is unlikely to deem the MoneyGram takeover a national security threat, legal experts say, the deal could face more inspection than usual given Trump’s anti-China rhetoric. Meanwhile, there is a push in Washington to boost CFIUS’s power.
Ant is a behemoth in China, where it serves more than 450 million customers and provides services from wealth management and insurance to credit checks and consumer loans. Formally known as Zhejiang Ant Small & Micro Financial Services Group Co., the company was valued at $75 billion by Hong Kong investment group CLSA in September and is expected to go public some time this year.(Bloomberg)
