China Blocked for MoneyGram Acquisition

Banking, finance, and taxes

Published: January 3, 2018 12:45 pm

Last Updated: January 12, 2020 4:53 am

MoneyGram International Inc. (NASDAQ: MGI) shares took a big step back on Wednesday after its acquisition was blocked by the U.S. government, specifically the Committee on Foreign Investment in the United States (CFIUS). Alibaba Group Holding Ltd. (NYSE: BABA) was ultimately behind the acquisition, through its subsidiary Ant Financial (formerly known as Alipay). Not to mention, this is proving to be an example of increased scrutiny on Chinese investment.

Although CFIUS squashed any hopes these companies had of merging, MoneyGram and Ant Financial plan to work together on new strategic initiatives in the remittance and digital payments markets that will help each company achieve its objective of enabling consumers around the world to enjoy better money transfer services.

The merger was originally valued up to $1.2 billion. In terms of the breakdown, this would have valued the stock at $18 per share, a premium of 12.5% from the 200-day moving average ($16.00).

Also in accordance with the merger agreement, Ant Financial will pay MoneyGram a $30 million termination fee.

Alex Holmes, CEO of MoneyGram, commented:

The geopolitical environment has changed considerably since we first announced the proposed transaction with Ant Financial nearly a year ago. Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger. We are disappointed in the termination of this compelling transaction, which would have created significant value for our stakeholders. The MoneyGram Board and management team greatly appreciate the significant time and energy that so many of our colleagues have devoted to trying to complete the transaction.
Shares of MoneyGram were last seen down about 10% at $12.01, with a consensus analyst price target of $15.33 and a 52-week range of $11.26 to $17.92.

Shares of Alibaba recently traded down 0.6% at $182.50. The stock has a 52-week trading range of $88.58 to $191.75 and a consensus analyst price target of $210.18.

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