Ant Financial tops offer for MoneyGram by 36%

Alibaba affiliate Ant Financial topped its offer to buy MoneyGram to around $1.2 billion. MoneyGram’s board approved the new offer overnight.

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Alibaba and Euronet have been in an intense competition to buy the U.S. payment firm. The company specializes in offline direct person to person payments.

The battle included a high-stakes lobbying effort to U.S. Lawmakers and the U.S. Treasury. Being a financial sector acquisition, the U.S. Government must approve the transaction.

Euronet bid $880 million for MoneyGram. It hopes the deal may trip up in the powerful U.S. Committee on Foreign Investments.

Historically, Chinese bids for financial companies have struggled for U.S. Government approval. But, Alibaba’s Jack Ma recently met with U.S. President Donald Trump, who would have final say over the deal.

If successful, this would be Ant Financial’s first acquisition in a developed market.

WHY THE BIDDING WAR FOR MONEYGRAM?

MoneyGram has approximately 350,000 agency locations in 200 countries and territories. The core business of MoneyGram is person to person money transfers, including many in underdeveloped countries.

The company also offers other financial services in select markets. These include prepaid credit cards, money orders, top-up mobile phones, and mobile wallets.

Euronet’s interest in MoneyGram was expansion into markets in which it does not operate.

Also, Euronet has relied on smaller merchants to provide agency services. MoneyGram has operations with larger retail chains and post offices.

For Ant Financial, the purchase would provide a U.S. based financial operation with a large global network in underdeveloped market segments. This would provide more opportunities for Alibaba to offer products in those markets.

As we had reported, Paypal and Amazon are expanding services to offer cash payments. Alibaba can immediately scale up to offer the same service.

The recent announcement by Amazon may have prompted Ant Financial to offer this large premium on the purchase of MoneyGram.

INDEPENDENT ONLINE RETAILERS MAY BENEFIT

SMB online retailers could see a benefit from the Ant Financial acquisition.

With Alibaba’s focus on eCommerce, Ant Financial is more likely to use MoneyGram to offer payment services to reach the under-banked U.S. consumer.

It could use the 350,000 global locations as payment points for goods and services offered by online retailers. By far, this exceeds networks in operation by Paypal and Amazon.

Alibaba has a self-interest to expand MoneyGram for online sales. But, to position the brand as an online payment solution, an expansion to independent online retailers would make sense.

In conclusion, offline solutions to fund online purchases are gaining momentum. The benefits to reach consumers in markets not served yet by eCommerce are substantial.

It will now be in the hands of regulators to decide if this deal will go through.