Ant Financial Stays Course on MoneyGram Purchase after Surprise Counterbid

(Beijing) — Ant Financial Services Group vowed on Wednesday to forge ahead with its plans to buy MoneyGram International Inc., hours after the U.S. money-transfer specialist received a higher unsolicited bid.

At the same time, MoneyGram said it would review the new offer from Euronet Worldwide Inc., but that its board would continue to recommend the deal announced in late January between the company and Ant Financial, the former financial services unit of e-commerce giant Alibaba Group Holding Ltd.

That original deal had Ant Financial offering to acquire MoneyGram for $13.25 per share in a deal valued at about $880 million. The unsolicited offer from Euronet would buy the same shares for about 15% more, or $15.20 each, valuing MoneyGram at more than $1 billion.

Shares of MoneyGram rose by 25% to $15.77 after Euronet launched its surprise bid, indicating investors believe higher bids could be coming.

“I would not be surprised if Ant makes a counteroffer,” said Ryan Roberts, an analyst at MCM Partners. “Euronet’s bid was 15% higher than Ant’s. If Ant doesn’t at least meet that, MoneyGram may face a shareholder backlash if they don’t consider the Euronet offer.”

Ant Financial is China’s leading private financial services provider, whose core asset is its Alipay electronic payments service. The company has remained largely confined to China despite its breakneck growth, and even its early steps onto the global stage are mostly targeted at Chinese traveling abroad.

Its MoneyGram purchase would mark a major shift from that China focus, adding to Ant Financial’s attraction to investors as it prepares to make an initial public offering in Hong Kong, the Chinese mainland, or both as soon as this year.

Following the Euronet bid, Ant Financial said it remains committed to buying MoneyGram, without commenting on whether it might raise its original offer.

“MoneyGram and Ant Financial continue to work cooperatively under the terms of our merger agreement, and together, we are making progress on schedule toward obtaining all required regulatory and shareholder approvals,” Ant Financial said. “We continue to anticipate closing our transaction with MoneyGram in the second half of 2017.”

In arguing its case, Euronet, a little-known electronic-payment services provider based in the U.S. state of Kansas, said it was better positioned to close a deal that could attract political scrutiny due to Ant Financial’s status as a Chinese company. Such sensitivities have killed a number of Chinese acquisition plans in the West over the last three years, nearly all in the high-tech semiconductor realm.

“Importantly, the combination of our two companies also offers stockholders a clear path to closing, which we view as a significant benefit in comparison to your current agreement with Ant Financial that contains conditions that make closing highly uncertain,” Euronet said in a statement to MoneyGram shareholders. ”We do not see any comparable uncertainty in our offer.”

Euronet said that Ant Financial’s proposed purchase would require a review by the U.S. agency that examines deals for national security concerns, whereas its own plan would require no such step.

“Already, members of Congress … and others have raised concerns about the transaction with Ant Financial, which include national security risks,” Euronet said. “MoneyGram’s handling and preservation of personal financial records of millions of U.S. customers for 10 years could complicate (the national security) investigation and potential mitigation measures. It appears increasingly clear that many expect the review and investigation of the Ant Financial transaction to be substantial, adding significant uncertainty to its outcome.”

MCM’s Roberts concurred that the national security issue could become problematic for the original Ant Financial deal.

“The deal may be somewhat sensitive in the U.S. given the current political climate, and approval may be tricky,” he said.

Contact reporter Yang Ge (geyang@caixin.com)