You are here
Jack Ma challenged by Kansas firm in MoneyGram fight
[NEW YORK] Six weeks after billionaire Jack Ma's Ant Financial announced a plan to take over MoneyGram International Inc, a little-known Kansas company is swooping in with a higher bid.
Euronet Worldwide Inc is offering US$15.20 a share for the money-transfer service, topping Ant's US$13.25 bid, according to a statement. Shares of MoneyGram jumped 25 per cent to US$15.77 in New York after the announcement on Tuesday, suggesting investors expect a bidding war. Euronet rose less than one percent to US$83.22.
Ant's plan to take over MoneyGram was presented by the two companies as a fait accompli, with the deal expected to be completed this year once regulators approved it.
That acquisition, meant to help Ant expand outside China, probably faces scrutiny from a Treasury Department agency that reviews foreign purchases of US companies. Michael Brown, Euronet's chief executive officer, said his bid is superior because it's more likely to get approved.
"The Ant Financial transaction is fraught with uncertainty and challenges at every level," Mr Brown said on a conference call to discuss his bid.
"We are committed and ready to move expeditiously."
MoneyGram said it will consult with outside advisers to review the offer and determine what would best serve the interests of the company and its shareholders. Meantime, the board hasn't changed its earlier recommendation supporting a combination with Ant.
Ant said it's still working with MoneyGram toward completing their deal in the second half of 2017.
"Ant Financial remains highly committed to the consummation of our merger with MoneyGram," the company said in a statement.
"We are making progress on schedule towards obtaining all required regulatory and shareholder approvals."
Western Union's stock climbed 3.5 per cent. Investors are speculating it too may become a takeover target, BTIG analyst Mark Palmer told clients in a note.
Since Mr Brown helped found Euronet in 1994, the Leawood, Kansas-based payments company has built a network of more than 35,000 ATMs and 800,000 point-of-sale terminals. He's long coveted MoneyGram for its brand, bidding for it in 2008 and again in 2013.
The deal would allow both companies to offer more services at more locations and would save US$60 million in cost synergies, according to a presentation on Euronet's website.
Ant is a behemoth in China, where it serves more than 450 million customers and provides services from wealth management and insurance to credit checks and consumer loans. Formerly a part of Alibaba Group Holding Ltd, it is still controlled by Mr Ma. Ant was valued at US$75 billion by Hong Kong investment group CLSA in September and is expected to go public this year.
Ant has been seeking to expand abroad as competition in its home market heats up, and the MoneyGram purchase was seen as a way to further that goal after recent partnerships with Paytm in India and Ascend Money in Thailand.
The Treasury Department's Committee on Foreign Investment in the United States would probably scrutinize a deal between Ant and MoneyGram. While CFIUS is unlikely to deem the MoneyGram takeover a national security threat, legal experts say, the deal could face more inspection than usual given President Donald Trump's anti-China rhetoric.
Andrew Jeffrey, an analyst at SunTrust Banks Inc, said in a note to investors that Euronet's proposal is "superior in all ways". The offer is higher and the transaction would be more likely to close, he wrote.
A substantial portion of MoneyGram's business could come under pressure from Mr Trump's stance on immigration and trade, because many immigrants use the firm to transfer money from the US to their families. Mr Trump proposed a plan last year to cut off the remittances Mexican immigrants send home. Mexico represents about 10 per cent of MoneyGram transactions, according to Bloomberg Intelligence.
Wells Fargo & Co is advising Euronet, with Gibson Dunn & Crutcher LLP providing legal advice. Citigroup Inc is Ant's financial adviser, and Bank of America Corp is MoneyGram's.