Chinese Capital Mergers with US Companies Fall 80%, Ant Financial Halts MoneyGram Acquisition
MoneyGram International and Ant Financial announced they had formally terminated their planned merger on January 3. Ant Financial will pay MoneyGram $30 million as a cancellation fee.
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At the same time, the two sides plan to conduct a new strategic business cooperation in the remittance and electronic payment market, and to provide faster and lower-cost transfer and remittance services to global customers.
On January 26, 2017, Ant Financial announced it reached a $880 million merger and acquisition agreement with MoneyGram at $13.25 a share. Later, Ant Financial raised the price to $18 a share when Euronet made a premium offer.
Foreign media previously reported that Ant Financial would sign a $3.5 billion bridge loan for the acquisition. Fourteen banks had the intention to be the MLAB, including ANZ bank, Barclays, Citigroup, Credit Suisse, DBS bank, Goldman Sachs, HSBC, ING, J.P. Morgan, Mizuho Bank and Morgan Stanley. With the acquisition terminated, the loan will also be terminated.
Ant Financial decided to purchase MoneyGram as part of its global strategy. Since 2015, Ant Financial has been expanding globally. Chinese Alipay users can pay by scanning codes in 36 countries. For overseas users, seven countries and regions have started to develop local versions of Alipay, including the Philippines’ GCash, South Korea’s Kakao Pay and an electronic wallet soon to be available in Indonesia and Malaysia.
On the MoneyGram merger, it seems Ant Financial failed to meet the expectations of CFIUS (Committee on Foreign Investment in the US). CFIUS didn’t approve the documents submitted by Ant Financial on multiple occasions.
Both Ant Financial and MoneyGram were reluctant to comment on CFIUS. MoneyGram CEO Alex Holmes said frankly in a press release, “Since we announced that we planned to sign an agreement with Ant Financial a year ago, considerable changes have taken place in geopolitics. Despite our best efforts to work with the US government, it is now clear that CFIUS will not approve the merger.”
CFIUS has tightened foreign investment reviews in the US since President Donald Trump took office, and several Chinese companies have faced obstacles in their acquisitions. In September, the US government stopped Canyon Bridge, a China-backed fund, from acquiring the US semiconductor maker Lattice on national security grounds. In late November, Cowen, a boutique investment bank in New York, cancelled a $275 million investment offered by China Energy Company Limited, citing delays and “uncertainty” approved by CFIUS as reasons.
Public reports shows deals delayed or cancelled include: NavInfo’s acquisition of 10 percent stake of Dutch map service providers HERE and China Oceanwide’s $2.7 billion acquisition of Genworth Financial, which was announced in December 2016.
Thomson Reuters data shows that in 2017, the number of Chinese companies merging with or acquiring American projects plummeted. As of November 2017, the mergers initiated by Chinese capital in the US was at $13.88 billion, down 80 percent than that in the same period in 2016, which was $60.36 billion.
The review released by Freshfields Bruckhaus Deringer in September 2017 said the unpredictability of the review process in time and results of CFIUS was significantly increasing. Over the past year, CFIUS spent at most six weeks to confirm whether the material was complete, and in the first 30 days of the trial period it only approved 20 percent of the cases. CFIUS also said it would submit more trades to the US president unless submitters agreed to withdraw and to re-submit documents. In the CFIUS review, China is the country with the largest number of censors in recent years.