Plans of major Chinese fintech firm Ant Financial Services Group to acquire money transfer provider MoneyGram International Inc. fell into bits, after US government regulators refused to support the takeover over national security concerns.
The agreement worth $1.2 billion was the highest profile Chinese deal to be rejected by the Committee on Foreign Investment in the United States (CFIUS) since President Donald Trump came to power.
The Alibaba Group Holding Ltd. financial affiliate’s merger agreement for the Dallas-based firm would have expanded a network of 350,000 agent locations in more than 200 countries that it said to reach billions of accounts.
It was also a big blow to Alibaba’s chief executive Jack Ma, who was aiming on creating millions of jobs in the US.
Despite the setback, Ant and MoneyGram are planning to continue working together on initiatives in remittance and digital payments. Ant will also pay $30 million termination fee for not closing the contract.
MoneyGram’s chief executive Alex Holmes expressed their disappointment in the termination of the transaction. The deal could have created huge value for their stakeholders.
US Toughening its Stance on Business Dealings with China
Sources with knowledge of the matter stated that CFIUS rejected the proposal over national security concerns. They believed that data safety on US military personnel and their families using MoneyGram’s service might have been at risk.
Shares of the money transfer firm declined by 6 percent to $12.40 during pre-market trade.
The US has been taking a tougher stance on business transactions with China. The country have long been criticized for its trade practices and its influence on traditional, heavy industries in the US.
It also carried out a formal assessment of China’s intellectual property in October last year.
US politicians and military heads have pushed the administration to further investigate Chinese investments in the country, particularly in the tech sector.
Buyout company Orient Hontai Capital’s $1.4 billion merger with mobile marketing platform AppLovin have also failed to pass CFIUS.
Investment group China Oceanwide Holdings Group Co. Ltd’s $2.7 billion acquisition of insurer Genworth Financial has been extended until April 1.