(Yicai Global) April 5 -- Alibaba Group Holding's [NYSE:BABA] Ant Financial Services Group is facing more challenges in its USD880 million takeover of US-based online financial firm, MoneyGram.
Last Friday, two senators from the US Republican Party expressed concern that the takeover could lead to national security issues, and called for a thorough investigation by the Committee on Foreign Investment in the US.
The problem came just weeks after Ant Financial's USD13.25 per share offer, made in January, was topped last month by Texas-based Euronet Worldwide, who offered USD15.2 a share. At the end of the month, MoneyGram signed an agreement with Euronet to further discuss the offer. Should they accept the new deal, they will be liable for a USD30 million fee for breaking the original contract, according to the Financial Times.
Senators Kevin Yoder and Eddie Bernice Johnson wrote to the US Secretary of the Treasury, Steven Mnuchin, advising that Chinese capital invested in the key infrastructure of the US's financial sector could lead to national security problems, Bloomberg reported. The acquisition needs to be evaluated with great caution, the pair added. Mnuchin also serves as the chairman of the CFIUS.
Their letter added that the success of Ant Financial's acquisition may lead to foreign governments being able to control key infrastructures in the US, allowing data to be used for location tracking and identifying vulnerable websites, which could be a threat to the country.
Michael Brown, Euronet's CEO, also wrote to Mnuchin with the same message. As online payment service suppliers obtain key user data, governments would look to maintain that data for years, he added. Payment suppliers will also need to be questioned by the Treasury Department's financial crime enforcement network, regarding potential involvement in terrorism and money laundering, Brown said.
The Chinese firm, however, has said it is happy to be investigated by the CFIUS. "Ant Financial will continue to work with MoneyGram to get the green light from regulators and shareholders, so we can make the deal later this year," the firm told Yicai Global.
"We only collect and transmit limited personal information," MoneyGram said. "This will be stored in our servers in Minneapolis after encryption. Even after the merger, this process will remain unchanged to ensure that transactions through the platform are not misused or viewed by any governments." The American firm's servers will remain in the US, and Ant Financial plans to keep MoneyGram's Dallas headquarters, along with its management team and employees.