Last year, MoneyGram, a global person to person money transfer company, was the subject of a bidding war between Alibaba’s affiliate Ant Financial and U.S. based Euronet Worldwide.
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Ant Financial won out the bidding over MoneyGram with a $1.2 billion offer topping Euronet’s $880 million bid. And MoneyGram’s board swiftly approved the Ant Financial bid despite concerns about difficulties of Chinese companies gaining U.S. regulatory approval of such mergers.
These concerns probably should have been taken a lot more serious as the Committee on Foreign Investment in the U.S. (CFIUS), a national-security panel, continued to block the approval of the acquisition.
By failing to gain the necessary U.S. governmental approval, both companies announced they have terminated the merger agreement.
The geopolitical environment has changed considerably since we first announced the proposed transaction. Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger.
Alex Holmes, MoneyGram Chief Executive Officer
Obviously, this immediately brings up the question would Euronet Worldwide jump back into a possible merger. But the company seems to have put the brakes on that idea a little when it issued this cautionary statement.
Euronet continues to believe there is compelling commercial logic to a combination between Euronet and MoneyGram. However, significant developments have been disclosed by MoneyGram since Euronet’s offer and Euronet has not conducted any evaluation of the business in that time. While we continue to view a transaction with MoneyGram as logical, there is no guarantee any offer will be made or any transaction will ultimately occur.
Euronet Worldwide, Inc. Statement
A Blow to Jack Ma
The failure to gain U.S. approval on the MoneyGram deal shows the difficulty Alibaba Group faces directly entering the U.S. market. A previous widely anticipated Alibaba owned marketplace focusing on U.S. sellers and buyers, 11 Main, failed to gain traction and the company decided to sell it just one year after it opened.
With MoneyGram, Ant Financial hoped yet again to gain a U.S. based and operated subsidiary from which to further build out its U.S. expansion.
But the MoneyGram deal faced an immediate hurdle as lawmakers, national security experts, and veterans voiced concerns that a service used by many military personnel may allow the Chinese Government to access sensitive financial information.
And in November, U.S. lawmakers introduced a broad bipartisan bill to make it more difficult for Chinese companies to acquire U.S. firms.
Ant Financial apparently tried three times to convince CFIUS to approve the deal, but with so much opposition from within the government ranks, it was doomed for failure.
The fundamental problem is the nature of the interaction between Chinese private enterprises and the communist government of China is blurry at best and considered too risky for many in the U.S. government.
Lawmakers may have serious concerns about national security implications, but the average consumer didn’t bite on the Main 11 marketplace either.
Is it the belief that a Chinese company is just going to flood the market with more cheap goods costing Americans more jobs? Or are people really worried about proving a Chinese company with credit card information or other personal details?
As is stands today, it seems Ma will have to be content with trying to promote Chinese manufacturing to U.S. businesses through the Alibaba marketplace, entice more U.S. producers to consider the Chinese market for their domestically produced products, and promote Chinese tourism to North America.
Trust seems to be a huge factor that keeps Jack Ma from expanding in the U.S., and it doesn’t look like that will change anytime soon.
Do you think Alibaba Group can ever really gain a domestic foothold in the U.S.? Drop us a line in the comments section below.
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