A United States government panel has rejected the acquisition of MoneyGram International by Ant Financial over concerns of national security, the two companies announced on Tuesday. This is the most high-profile attempted acquisition by a Chinese company to be blocked by the White House administration.
The blocking of the deal worth $1.2 billion is a huge blow to Jack Ma, the Alibaba Group Holding chairman. Ma and Alibaba executives own Ant Financial. He was attempting to expand the footprint of Ant Financial amidst fierce competition domestically from rival Tencent Holdings, the owner of the messaging app WeChat and its payments app.
Ma, a citizen of China who appears often with leaders from the Communist Party, promised U.S. President Donald Trump during a meeting last year he would be creating 1 million jobs in the U.S.
Following the news of the deal being blocked by the panel and subsequent termination of the deal by both companies, shares of MoneyGram fell 8.5% in trading after hours.
The Committee on Foreign Investment in the U.S. (CFIUS) blocked the proposals of the companies that tried to mitigate concerns related to the safety of personal data that could be used to identify citizens in the U.S., said sources close to the confidential talks.
MoneyGram CEO Alex Holmes via a prepared statement said that despite the best efforts of everyone involved to work cooperatively with the government panel, it is clear at this point that CFIUS is not going to approve the merger.
A standard review by CFIUS can take as long as 75 days, and the companies had already gone through this process on three occasions trying to address the panel’s concerns. More security measures as well as protocols the companies had suggested could not reassure CFIUS, said sources close to the merger deal.
The United States Treasury said by statute it is prohibited from releasing information that is with CFIUS and would not comment on the deal.
The government has made it much tougher for Chinese entities to purchase U.S. companies during a time when the White House is putting pressure on China to help stop the nuclear ambitions of North Korea and become more accommodative related to foreign exchange and trade issues.
The deal involving MoneyGram is just one of several acquisitions by Chinses companies of U.S. businesses that failed to clear the CFIUS hurdle. Others include the attempted buyout by Canyon Bridge Capital Partners of Lattice Semiconductor the U.S. chip maker and China Oceanwide Holdings acquisition for $2.7 billion of Genworth Financial a life insurer based in the U.S. amongst others.