US govt blocks Ant Financial takeover of MoneyGram

The US government has blocked the planned takeover of MoneyGram by Alibaba's Ant Financial Services Group due to security concerns. The two companies have abandoned the merger but said they plan to cooperate still in the remittance and digital payments markets.

Ant Financial provides payment services to sellers and buyers on Alibaba's various e-commerce and internet platforms, including the popular Chinese mobile wallet service Alipay. They Chinese company agreed in April 2017 to pay USD 1.2 billion for MoneyGram. The deal was expected to provide a platform to support Ant Financial's expansion abroad and into the remittances market, as well as give a boost to Alibaba's growing international business. 

Geopolitical changes

US-based MoneyGram said they were unable to obtain the required approval for the transaction from the Committee on Foreign Investment in the United States (CFIUS), "despite extensive efforts to address the committee's concerns". CEO Alex Holmes said in a statement that "the geopolitical environment has changed considerably" since the merger was first announced and the company was "disappointed" by the regulatory decision.

The CFIUS, part of the US Treasury department, reportedly was concerned about the safety of transaction data that can be used to identify US citizens, sources familiar with the matter told Reuters. The Committee did not accept the remedies proposed by the companies.

Cooperation in digital payments

Under the new strategic business cooperation, MoneyGram and Ant Financial will develop initiatives to bring together their capabilities in remittance and digital payments and provide their respective customers with 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", they said.

In accordance with the merger agreement, Ant Financial paid MoneyGram a USD 30 million termination fee.