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Key US panel nixes Ma's Ant Financial bid to buy MoneyGram

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03 January 2018

Ant Financial, the Chinese financial services giant controlled by Alibaba co-founder Jack Ma, has abandoned a plan to buy MoneyGram International Inc after failing to win approval for the deal from a key US government panel.

The Committee on Foreign Investment in the United State (CFIUS) rejected Ant Financial's acquisition of US money transfer company MoneyGram over national security concerns, the companies said on Tuesday, making it the most high-profile Chinese deal to be torpedoed under US President Donald Trump's administration.

The $1.2-billion deal's collapse is a blow for Jack Ma, the executive chairman of Chinese internet conglomerate Alibaba Group Holding Ltd, who owns Ant Financial together with Alibaba executives. He was looking to expand Ant Financial's footprint amid fierce domestic competition from Chinese rival Tencent Holdings Ltd's WeChat payment platform.

Ant Financial may now have to re-tool its global ambitions, with what would have been its largest overseas acquisition scuppered just as it begins preparations to go public in the next year or so.

Ant and Moneygram now plan to work together on initiatives in remittance and digital payments, they said in a joint statement.

The end of the bid comes almost a year after Ma, a Chinese citizen who appears frequently with leaders from the highest echelons of the Communist Party, had met with then President-elect Donald Trump and talked of creating a million US jobs.

Ant Financial's $1.2-billion deal for Dallas-based MoneyGram would have added a network of 350,000 agent locations in more than 200 countries and territories that it says reaches billions of accounts.

But the deal faced intense scrutiny from a government panel that's become more active in blocking Chinese investments. Ant submitted its proposal to the CFIUS several times, to no avail. Last spring, two House of Representatives members said the acquisition could allow ''malicious actors'' to obtain data on US military personnel and their families who use the service.

 ''Despite our best efforts to work cooperatively with the US government, it has now become clear that CFIUS will not approve this merger,'' MoneyGram chief executive Alex Holmes said in a statement.

A standard CFIUS review lasts up to 75 days, and the companies had gone through the process three times in order to address concerns. Additional security measures and protocols that the companies suggested failed to reassure CFIUS, reports said.

The US Treasury said it is prohibited by statute from disclosing information filed with CFIUS and declined to comment on the MoneyGram deal.

The US government has toughened its stance on the sale of companies to Chinese entities at a time when Trump is trying to put pressure on China to help tackle North Korea's nuclear ambitions and be more accommodative on trade and foreign exchange issues.

The MoneyGram deal is the latest in a string of Chinese acquisitions of US companies that have failed to clear CFIUS. They include China-backed buyout fund Canyon Bridge Capital Partners LLC's $1.3 billion acquisition of US chip maker Lattice Semiconductor Corp, China Oceanwide Holdings Group Co Ltd's $2.7 billion acquisition of US life insurer Genworth Financial Inc and Chinese buyout firm Orient Hontai Capital's $1.4 billion acquisition of U.S. mobile marketing firm AppLovin.

The MoneyGram's deal demise is also the latest example of how CFIUS' focus on cyber security and the integrity of personal data is prompting it to block deals in sectors not traditionally associated with national security, such as financial services.

Other US financial services deals by Chinese firms are waiting for approval from CFIUS, including HNA Group Co's acquisition of hedge fund-of-funds firm SkyBridge Capital LLC from Anthony Scaramucci, the Trump administration's former communications director.





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