The View | There’s a lot riding on Ant Financial’s US$1.2b bid for MoneyGram
‘A rejection of the deal by regulators will pose onerous implications for future Chinese acquirers’
When is an acquisition not an acquisition? When it is a Chinese deal. Overseas deals by Chinese companies have become so difficult and uncertain to close that they are affecting their legitimate expansion needs. The result could be substantially added costs for Chinese buyers.
Anbang Insurance’s serial failures in closing are the type that worry investment bankers. Its attempted US$14 billion takeover of Starwood Hotels & Resorts of the US, was eventually blocked by Chinese regulators, but it appeared as if the buyer didn’t have financing in place. Then, on Monday, US insurer Fidelity & Guaranty Life announced that it formally terminated a US$1.57 billion buyout with Anbang.
Bankers have said that sellers demand that Chinese buyers show proof of funding in the form of an account in the US or a letter of credit from a US bank. Yet all this still doesn’t mean a transaction free and clear of the authority of Beijing.
Anbang Insurance’s serial failures in closing are the type that worry investment bankers
That Wanda was willing to pay Eldridge Industries, owner of Dick Clark Productions, a US$50 million breakup fee after their deal fell apart showed mainland companies are willing to bear the big transaction costs that come with grandiose deals.
Ant Financial, the digital payments affiliate of China’s Alibaba, recently increased its bid for MoneyGram by 36 per cent to US$1.2 billion a month after Euronet Worldwide barged into its original US$880 million offer. Ant’s offer has been accepted by MoneyGram’s board, but is still pending US regulatory approval.
The pursuit for MoneyGram shows many of the obstacles facing Chinese companies pursuing deals in the US. Rival bidder Euronet and US politicians highlighted the political risks of selling to a Chinese organisation.
Payment processing and remittances are considered a core part of a financial system from a compliance viewpoint of know-your-client and anti-money laundering regulation. However, the kind of funds transfer and remittance being done by MoneyGram does not entail as much risk regarding personal financial data compared to a bank account or credit card. Nonetheless, in the current political environment, stirring fears of national security breaches could be an effective way to spoil a Chinese offer.
