Chinese billionaire Jack Ma’s (馬雲) latest US expansion plan is facing rising political obstacles.
Two members of the US House of Representatives on Friday urged the Committee on Foreign Investment in the US (CFIUS) to conduct a “full and thorough” investigation of Ant Financial’s (螞蟻金服) proposed acquisition of MoneyGram International Inc, a money-transfer service.
“The proposal merits careful evaluation as it would provide Chinese access to the US financial infrastructure, a move that would pose significant national security risks if completed,” US Congressman Kevin Yoder and US Congresswoman Eddie Bernice Johnson wrote in a letter to US Secretary of the Treasury Steven Mnuchin.
Formerly a financial-services affiliate of Alibaba Group Holding Ltd (阿里巴巴) and controlled by Ma, Ant made its bid in January for US$880 million, or US$13.25 a share. Last month, Leawood, Kansas-based rival Euronet Worldwide Inc came in at US$15.2, saying its offer had a better chance at regulatory approval.
Dallas-based MoneyGram entered a confidentiality agreement with Euronet late last month to further consider its unsolicited proposal.
Chinese companies have been on an acquisition spree in the US for many years, but the trend has slowed recently in the face of mounting political opposition and national security concerns. In December last year, German semiconductor maker Aixtron SE’s planned sale to a Chinese-based company fell through after then-US president Barack Obama upheld a CFIUS recommendation that the sale should be stopped. Aixtron has a subsidiary in California and about 20 percent of its sales are generated in the US.
US President Donald Trump has taken a hard stance on China, increasing the chance Ant Financial’s bid will be closely scrutinized by CFIUS, an inter-agency panel that examines acquisitions of companies by foreign investors. The White House can stop the deal, and Mnuchin is chairman of the panel.
Research firm Beacon Policy Advisors expects the new US administration to block “a wide range” of deals as part of Trump’s “America First” agenda.
MoneyGram shares fell 0.50 percent to US$16.81 at the close in New York. They have more than doubled in the past year.
Euronet chief executive officer Michael Brown wrote to Mnuchin this week arguing that Ant’s offer raises US national security concerns because money transmitters collect confidential data on users which the government requires them to retain for several years. Money transmitters also get confidential requests from the US Department of the Treasury’s Financial Crimes Enforcement Network about transactions that might be connected to terrorism or money laundering.
Yoder and Johnson reiterated those concerns in their letter on Friday, pointing out that Ant Financial is partly owned by Chinese state institutions. This could give a foreign government access to critical infrastructure and could be used for “intelligence purposes, location tracking and identifying vulnerabilities for coercion,” they said.
The total Chinese state-owned or state-affiliated ownership of Ant Financial is just below 15 percent, according to a person familiar with the matter.
Those investors are passive and the entities do not participate in Ant’s management or board, the person said.
Ant Financial, which has more than 630 million users and provides wealth management, insurance, credit checks and consumer loans, said it sought the CFIUS review.
“Ant will continue working with MoneyGram to obtain all required regulatory and shareholder approvals to successfully close the transaction later this year,” the company said in an e-mailed statement.
The transaction would not give the Chinese government access to personally identifiable information of Americans collected by MoneyGram in the US, and MoneyGram’s servers and data would stay in the US, the person familiar with the matter said.
Ant Financial also plans to keep MoneyGram’s headquarters, management team and employees in Dallas.
MoneyGram said it only collects and transmits a limited amount of personally identifiable information that is encrypted and stored at its facility in Minneapolis, Minnesota.
That process would continue under the agreement with Ant Financial to ensure “transactions are fully safeguarded and not misused or accessed by any government — including the Chinese government,” it added.
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