US blocks MoneyGram sale to Chinese firm

NEW YORK — A United States government panel has rejected Chinese Ant Financial’s acquisition of US money transfer company MoneyGram International over national security concerns, the companies said on Tuesday.

This is the most high-profile Chinese deal to be torpedoed under the administration of US President Donald Trump. The collapse of the $1.2bn deal represents a blow for Jack Ma, the executive chairman of Chinese internet conglomerate Alibaba Group Holding, who owns Ant Financial together with Alibaba executives. He was hoping to expand Ant Financial’s footprint amid fierce domestic competition from Chinese rival Tencent Holdings’ WeChat payment platform.

Ma, a Chinese citizen who appears frequently with leaders from the highest echelons of the Communist Party, had promised Trump in a meeting a year ago that he would create 1-million US jobs. MoneyGram shares were down 8.5 present at $12.06 in after-market trading. The companies decided to terminate their deal after the Committee on Foreign Investment in the US (CFIUS) rejected their proposals to mitigate concerns over the safety of data that can be used to identify US citizens, according to sources familiar with the confidential discussions.

“Despite our best efforts to work cooperatively with the US government, it has now become clear that CFIUS will not approve this merger,” MoneyGram CEO Alex Holmes said. The US Treasury said it was 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 to 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 reviews. They include China-backed buyout fund Canyon Bridge Capital Partners’ $1.3bn acquisition of US chip maker Lattice Semiconductor; and Chinese buyout firm Orient Hontai Capital’s $1.4bn acquisition of US mobile marketing firm AppLovin.

In November, China Oceanwide Holdings Group and Genworth Financial extended a deadline to April 1 for the Chinese group’s planned $2.7bn takeover of the US life insurer.

The demise of the MoneyGram deal is also the latest example of how CFIUS’s 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.

Dallas-based MoneyGram has about 350,000 remittance locations in more than 200 countries. Ant Financial was looking to take over MoneyGram not so much for its US presence but to expand in growing markets outside China. Ant Financial had argued that MoneyGram’s data infrastructure would remain in the US, with personal information encrypted or held in secure facilities on US soil. Ant Financial said it paid MoneyGram a $30m termination fee for the deal’s collapse. — Reuters.