Ant Financial Services, the largest financial technology business in the world, announced Thursday that it was acquiring MoneyGram International the money-transfer company based in the U.S. The deal is for $880 million.
The deal should shake up the landscape of international payments.
Ant is the payment affiliate of Alibaba Group the giant e-commerce company based in China and dominates the China online payments industry. With the acquisition, Ant will expand significantly its overseas presence, as competition from Tencent Holdings’ Wechat payment systems is heating up.
Tencent Holdings is one of Alibaba’s biggest domestic rivals.
The offer per share of $13.25 is an 11.5% premium of the close on Wednesday of MoneyGram’s stock. Shares of MoneyGram were up almost 9% late Thursday.
The companies announced the deal is subject to the approval of the Committee on Foreign Investment in the U.S., an inter-agency panel in the U.S. that reviews acquisitions by foreign companies of domestic ones for concerns of national security
CIFIUS can and has been a roadblock for a number of deals in the U.S. Ant’s MoneyGram acquisition comes at a time of rising tension between the U.S. and China over the willingness of President Donald Trump to re-evaluate important foreign policy issues like “One China.”
Trump is also threatening to impose tariffs on imports from China.
However, Trump has met with billionaire Jack Ma the founder of Alibaba following his election and described Ma as open-minded and smart.
MoneyGram, along with competitor Western Union, has dominated money transfers with its huge network of locations. It has close to 350,000 outlets located in retail stores, banks and post offices in almost 200 territories and countries.
During the last couple of years, growing competition has been faced by companies in brick and mortar establishments from companies that have been more tech-savvy and are able to offer less expensive online services.
The technological expertise of Ant’s combined with the large network of MoneyGram along with its established brand might change the landscape for the money-transfer industry and lead to more consumers to use their transfer system online rather than take cash to stores to have it sent.
Financial tech companies in China are increasing, helped by rapid digitization as well as the increase of China’s middle class.
Chinese financial tech investors represented 46% of all investments of venture capital globally in fintech for the first three quarters of 2016.
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