What the collapse of MoneyGram-Ant Financial merger means for India

MoneyGram’s merger with Ant Financial has collapsed after both companies failed to get the approval for the transaction from the United States’ Committee on Foreign Investment in the United States (CFIUS).

“The geopolitical environment has changed considerably since we first announced the proposed transaction with Ant Financial nearly a year ago. Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger,” MoneyGram CEO said in a statement.

CFIUS is an inter-department body which looks at acquisitions by foreign companies. Ant Financial’s bid was scuttled by US President Donald Trump’s “America First” policy. Two members of US Congress – Kevin Yoder and Eddie Bernice Johnson – called on CFIUS for an investigation into Ant Financial’s proposal as it would allow Chinese access to the US financial infrastructure. They added that the proposed deal could also pose a significant threat to the US’ national security.

Unsolicited bid from Euronet

Ant Financial had to raise its bid by 36% in order to counter an unsolicited bid from Kansas-based electronic payments company Euronet. The Euronet proposal was seen as more favourable to US lawmakers.

Ant Financial offered $18 per share in cash as opposed to its earlier bid of $13.25 per share. This pegged the deal at $1.2 billion. Euronet came forward a proposal to acquire all outstanding shares of MoneyGram Common Stock and Preferred Stock for $15.20.

Following the collapse of the merger, Euronet issued a statement saying that there is still “compelling commercial logic” to pursue the merger but said that it would be conditional. “Significant developments have been disclosed by MoneyGram since Euronet’s offer and Euronet has not conducted any evaluation of the business in that time. While we continue to view a transaction with MoneyGram as logical, there is no guarantee any offer will be made or any transaction will ultimately occur,” Euronet said.

India implications

The failed deal merger will have repercussions for India as well. Remember that when Ant Financial had initially signed a deal with MoneyGram for $800 million last year, the combined entity would be able to able to tap the 450 million registered users on Alipay (in China), and the 200 million users registered with Paytm (in India) for money transfers across borders.

Now the companies said that they would be strategic co-operators. “MoneyGram and Ant Financial will explore and develop initiatives to bring together their capabilities in remittance and digital payments to provide their respective customers with user-friendly, rapid-response and low-cost money transfer services into China, India, and the Philippines, among other Asian markets, as well as in the US and other key regions around the world,” Holmes added.

In India, MoneyGram is an entity authorized by the Reserve Bank of India for accepting cross-border inward remittances. India is one of the large markets in the world for inward remittances.

However, there is a significant consolidation in the number of cross-border inward remittances players in India. Software company Ebix has been on an acquisition spree in India and has bought three money transfer companies – Paul Merchants, YouFirst Money Express Private Limited and Wall Street Finance Limited – and is building a financial exchange by buying ItzCash and travel marketplace Via.com.

Meanwhile, the Reserve Bank of India (RBI) has given a fillip to wallets when it comes to cross-border money transfers with the new guidelines. However, the wallets need to be fully KYC compliant and issuers can enable this facility only on explicit request of the customers.