(Yicai Global) April 17 -- Despite the obstacles, Ant Financial Services Group, the financial service platform affiliated with China's e-commerce giant Alibaba, is faced with in acquiring the US online money transfer service provider MoneyGram, it shows that it is determined to pursue its action by raising the offer for it to USD1.2 billion, an increase of 36% over the initial offer of USD880 million.
The new offer is equivalent to an acquisition price of USD18 per share, which is nearly 18 percent higher than the US$15.2 bid from Euronet Worldwide, Inc., a US electronics firm. MoneyGram signed a confidentiality agreement with Euronet Worldwide at the end of March to further consider its acquisition request.
MoneyGram's share price has risen to US$16.5 on Thursday. The company headquartered in Dallas has yet to respond to the news about Ant Financial's new offer. However, MoneyGram is to convene a special general meeting on May 16 to vote on the latest offer.
Ant Financial was not available to comment on the company's raised bid for MoneyGram. However, Doug Feagin, president of Ant Financial's international business, said in a statement, "We plan to expand the US team and provide MoneyGram with better opportunities for growth."
Euronet remarked it would have a greater chance of getting approval for the acquisition. Owing more than 35,000 ATMs and more than 800,000 terminal sales points worldwide, Euronet had previously filed a MoneyGram takeover offer twice in 2007 and 2013.
Given the Donald Trump's "US First" policy that can obstruct broader deals by foreign firms in the US, Ant Financial's possible overseas acquisition of this scale will come under serious scrutiny.
Earlier this month, Bloomberg reported that two Republican lawmakers from the US House of Representatives called on the Committee on Foreign Investment in the United States (CFIUS) for a "thorough" investigation into the Ant Financial's acquisition of MoneyGram. Kevin Yoder and Eddie Bernice Johnson, the two congressmen, have written to Steven Mnuchin, the U.S. Treasury Secretary, saying "this acquisition should be assessed meticulously, given that the national security issues may arise from the infiltration of the Chinese capital into the crucial infrastructures of our financial industry."
"Ant Financial's successful acquisition of MoneyGram depends on the 'weather'," said Chen Jizheng, financial advisory partner in Deloitte, "since the U.S. government is concerned about the business sectors related to national defense that may be a threat to its national security, so unless the said sectors will be spun off from the whole business, the acquisition won't be successful."
Previously, Michael Brown, the CEO of Euronet, also wrote to Mr. Mnuchin stressing the "possible danger to the nation's security" this acquisition may cause. Online payment service providers, he commented, would obtain access to the key data that would be generated from the users' operations, and the government requires such data to be stored for several years. Moreover, the providers are also checked by the Treasury Department's enforcement network for financial crime against possible terrorism and money-laundering links.
In its response, MoneyGram has said that personal identity information to be gathered and transmitted is limited, and has been stored in its facilities in Minneapolis, Minnesota, after encryption. This method of information processing won't be altered even if the company has been acquired by Ant Financial. MoneyGram's servers and data will be retained in US as before, and its headquarters, management team and employees will remain in Dallas, as proposed by Ant Financial.
A previous statement from Ant Financial to Yicai Global stressed that it will keep working jointly with MoneyGram to have the transaction approved by all necessary regulatory institutions as well as shareholders and to finalize it later this year.
The overseas M&As by Chinese enterprises have been lasting for years. However, the Chinese investments in some key segments have been facing increasingly rigid regulations and scrutiny in recent years, slowing down the M&A attempts or discouraging them. Last December, Aixtron, a German semi-conductor manufacturer, planned to be acquired by a Chinese enterprise, which the Obama Administration was immediately opposed to, cited Aixtron having subsidiaries in California and the sales in US representing 20 percent of its global business as the reason for its rejection of the Chinese bid.
At the beginning of this month, five US lawmakers from the Democratic Party jointly opposed Anbang's investments in Kushner Family's office building project in Manhattan. They called it an "obvious conflict of interests." Previously, another real estate investment bid by Anbang in San Diego, California, was also turned down by the US government, stating that "it is too close to San Diego naval base."
However, all such attempts will not hinder the pace of Ant Financial's overseas expansion. Last September, CLSA reported the valuation of Ant Financial as nearly USD75 billion. It also hinted Ant Financial considers initiating an IPO as early as this year.
In Asia, Ant Financial has already built up its own mobile payment empire. Last week, Ant Financial and Emtek, an Indonesian internet company, declared that they had entered into a strategic cooperation agreement to set up a joint venture and develop mobile payment products. The aim was to tap into the market of a country with the third largest population in Asia, with one of the fastest growing number of internet users.
This cooperation agreement was the fifth one Ant Financial inked on payment business since last November. Apart from Emtek, it has also signed cooperation agreements with Ascend Money of Thailand, Kakao of South Korea, and Mynt, a Philippines fintech company. It plans to procure more agreements in Asia this year.