MoneyGram and Ant Financial call off merger plans

US-POLITICS-TRUMP

Some are nearly certain to read politics into this latest deal, noting that Trump has indicated he's willing to mix business with politics in the relationship with China.

Also in accordance with the merger agreement, Ant Financial will pay MoneyGram a $30 million termination fee.

Another high-profile deal before CFIUS is the purchase by HNA Group of SkyBridge Capital LLC, a hedge fund of funds firm, from Anthony Scaramucci, the Trump administration's former communications director. Trump told reporters in the Trump Tower lobby that Ma was a "great, great entrepreneur".

The US$1.2 billion deal's collapse represents a blow for Jack Ma, the executive chairman of Chinese internet conglomerate Alibaba Group Holding Ltd, who owns Ant Financial together with Alibaba executives.

Ma, a Chinese citizen who appears frequently with leaders from the highest echelons of the Communist party, had promised the United States president in a meeting a year ago that he would create 1m U.S. jobs. Last year's lobbying went toward discussing "proposed acquisition and foreign direct investment", as well as counterfeiting and copyright-holder protection, according to the disclosures.

MoneyGram CEO Alex Holmes via a prepared statement said that despite the best efforts of everyone involved to work cooperatively with the government panel, it is clear at this point that CFIUS is not going to approve the merger.

"Despite our best efforts to work cooperatively with the USA government, it has now become clear that CFIUS will not approve this merger".

But now it seems like that move was all for naught, with word that the deal was rejected by the Committee on Foreign Investment in the United States (CFIUS), the USA body that reviews all cross-border purchases for national security implications (English article).

The deal involving MoneyGram is just one of several acquisitions by Chinses companies of USA businesses that failed to clear the CFIUS hurdle. For key reasons, this block sends a stronger "freeze" signal than the Lattice decision. The company claims 30,000 locations in the USA and more than 350,000 in countries around the world. In China, though, the lines between state-backed and private can often be blurred-Ant's $4.5 billion funding round in 2016 was led by state-controlled firms.

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The country launched a formal review of China's intellectual property practices in October previous year.

Ant Financial, the Alibaba affiliate which controls Alipay - China's top mobile wallet - and other financial services, announced a deal to buy Nasdaq-listed MoneyGram in April 2017 after it beat off a rival bid from Euronet.

JFWBK's Michael Freitag, Joseph Sala and Viveca Tress work the MoneyGram account. If the MoneyGram acquisition had gone through, the Chinese firm could have gained a foothold into financial services in North America.

Ant Financial disputes this.

The proposed $1.2bn (£880m) sale of U.S. company MoneyGram to a China-based group has been blocked.

"Establishing this new strategic cooperation with MoneyGram will add a partner with global remittance capabilities to our ecosystem", said Doug Feagin, president of Ant Financial International.

A standard review by CFIUS can take as long as 75 days, and the companies had already gone through this process on three occasions trying to address the panel's concerns.

Update, Jan. 4: This story was updated with comment from Ant Financial.

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