The dream of Jack Ma to buy U.S.-based money transfer company MoneyGram has been shattered. Several sources indicate that American regulators have raised objections to the $1.2 billion deal. Ant Financial Services, which is owned by the Chinese billionaire Ma, decided to drop the bid.
Speaking on the matter of which some people are calling a spiked merger, MoneyGram CEO Alex Holmes said, “The geopolitical environment has changed considerably since we first announced the proposed transaction with Ant Financial nearly a year ago.”
Holmes further stated, “Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that they [the Committee on Foreign Investment in the United States] will not approve the merger.”
However, there has been no explanation provided by the CFIUS on why the deal has been rejected (CFIUS is a unit of the Treasury).
Local newspapers such as the South China Morning Post in Hong Kong stated that the “political climate is not welcoming to Chinese firms.”
Despite the best efforts put forth by Jack Ma to form a bond with the Trump administration, the deal comes as a major disappointment. Earlier in 2017, Ma visited Trump Tower.
As soon as the news broke, shares of MoneyGram tumbled by 7 percent in after-hour trading activities. Jack Ma, the founder of Alibaba which is one of the largest Chinese e-commerce, retail and technology companies, promised the Trump administration that he would help to create 1 million jobs in the U.S. by helping small businesses sell their goods to the Chinese.
With this disappointment, Ant Financial Services Group must find alternate means to further its expansion goals. They were eyeing MoneyGram because of its key partnerships with retail giants such as Walmart and CVS.
Had this merger been successful, it would have given a competitive edge to Alibaba against its Chinese competitor, Tencent. Analysts think this decision by the U.S. could have possible repercussions to U.S. companies who are operating in China.