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March 16, 2017

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Euronet trumps Ant’s bid for MoneyGram

US electronic payment company Euronet Worldwide Inc has launched a US$1 billion bid for rival MoneyGram International Inc, arguing that its all-American deal would face less regulatory scrutiny than a lower bid by China’s Ant Financial Services Group.

Ant Financial, the financial services affiliate of Alibaba Group, said it remained committed to its deal.

“MoneyGram and Ant Financial continue to cooperate under the terms of our merger agreement, and together, we are making progress on schedule towards obtaining all required regulatory and shareholder approvals,” Ant Financial said in a statement.

MoneyGram said it would “carefully review and consider” the proposal from Euronet.

“MoneyGram remains subject to the terms of the definitive merger agreement with Ant Financial, and MoneyGram’s board has not changed its recommendation in support of the merger agreement with Ant Financial,” it said.

Ant Financial said in January that it would acquire Dallas-based MoneyGram for US$13.25 per share, or about US$880 million, in its first major move to expand its presence overseas.

MoneyGram is one of the biggest players in the global remittance market, and a takeover would enable Kansas-based Euronet to better compete against digital startups which are transforming the money transfer business.

“Euronet is the No. 4 traditional offline global player via its Ria brand so it’s not a surprise they have tried to crash the party,” said Michael Kent, CEO of money transfer business Azimo. “Should be a major synergy play there.”

Euronet has four money transfer businesses — Ria, IME, HiFX and XE. Euronet focuses more on independent agents, while MoneyGram targets large retailers and national post offices.

MoneyGram, alongside Western Union Co, has long dominated the global money transfer industry with its large network of retail locations. It has about 350,000 outlets in retail shops, post offices and banks in nearly 200 countries and regions.

A Euronet deal would not require clearance by the Committee on Foreign Investment in the United States, a US inter-agency panel that reviews foreign takeovers of domestic assets for national security concerns.

The CFIUS has been a stumbling block for several Chinese deals in the US and was considered a big hurdle for Ant Financial. A Euronet deal is likely to be more agreeable to US policy-makers.

Ant dominates China’s online payment market but has been ramping up investment overseas amid fierce rivalry at home with peers such as Tencent’s popular WeChat Pay.

Attractive market

A MoneyGram acquisition would have boosted Ant’s global presence ahead of a future initial public offering, allowing it to deploy its technology in the large US payment market with a well-known brand.

The takeover interest in MoneyGram spilled over into its biggest competitor, Western Union. Mark Palmer, an analyst at BTIG, wrote in a research note on Tuesday that Euronet’s bid for MoneyGram underlines “the attractiveness and potential of the global remittance space” and that it may “have given rise to the notion that WU could be an acquisition candidate for another deep-pocketed firm.”

While a deal with Euronet would bring cost synergies, a combination of Ant’s technological expertise and MoneyGram’s brand had been seen as a game-changer for the international payment industry with scope for more consumers to use online transfer services rather than taking cash to storefronts.

In addition to offering US$15.20 for each MoneyGram common and preferred stock share on an as-converted basis, Euronet also offered to assume about US$940 million of MoneyGram’s outstanding debt.

“The combination of Euronet and MoneyGram offered stockholders a clear path to closing,” Euronet CEO Michael Brown said in a letter to MoneyGram’s board.


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