The Committee on Foreign Investment in the United States (CFIUS) has opposed the sale of MoneyGram, a money transfer firm, to a subsidiary of a Chinese company named Alibaba, according to a Wednesday announcement.
According to Reuters: “Ant Financial’s plan to acquire U.S. money transfer company MoneyGram International Inc. collapsed on Tuesday after a U.S. government panel rejected it over national security concerns.”
As the heads of both companies announced Wednesday, the deal is dead after nearly a year of negotiations. MoneyGram CEO Alex Holmes said of the deal’s rejection: “The geopolitical environment has changed considerably since we first announced the proposed transaction. Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger.”
CFIUS, an interagency group of regulators based out of the Treasury Department, is responsible for reviewing pending foreign purchases of U.S. businesses. While CFIUS has blocked several other pending sales of U.S. businesses to Chinese firms under the administration of President Donald J. Trump, the sale to Ant Financial is “the most high-profile Chinese deal to be torpedoed under the administration.”
Ant Financial’s parent company, Alibaba, is worth nearly $500 billion, making it one of the world’s most valuable businesses. Doug Feagin, president of Ant Financial International, said they would partner with MoneyGram under a “new strategic cooperation,” and that they were “excited and encouraged” about the future.
Trump took office amid growing tensions between the China and the U.S over trade, intellectual property and connections with North Korea.
Following the collapse of the deal between Ant Financial and MoneyGram, commentary published by official Chinese news agency Xinhua declared: “China and the United States are about to ride a bumpy journey in trade in 2018 if the U.S. government goes its own way, and retaliatory measures by China could be on the table.”
The $1.2 billion deal’s failure represents a blow for Jack Ma, the executive chairman of Chinese internet conglomerate Alibaba Group Holding Ltd (BABA.N), 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 (0700.HK) 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 U.S. jobs.
MoneyGram shares fell 8.5 percent in after-market trading.
The companies decided to terminate their deal after the Committee on Foreign Investment in the United States (CFIUS) rejected their proposals to mitigate concerns over the safety of data that can be used to identify U.S. citizens, according to sources familiar with the confidential discussions.
The MoneyGram deal is the latest in a string of Chinese acquisitions of U.S. companies that have failed to clear CFIUS, including the $1.3 billion purchase by China-backed buyout fund Canyon Bridge Capital Partners LLC of U.S. chip maker Lattice Semiconductor Corp (LSCC.O).
In November, China Oceanwide Holdings Group Co Ltd (0715.HK) and Genworth Financial Inc (GNW.N) extended a deadline to April 1 for the Chinese group’s planned $2.7 billion takeover of the U.S. life insurer.
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