Euronet's bid throws a wrench in Alibaba's global strategy for its payment processing arm Ant Financial in western markets. (Photo : Getty Images)
U.S. e-payments provider Euronet has outbid its Alibaba-backed rival Ant Financial over the acquisition of popular money transfer service MoneyGram, arguing that its all-American deal would face less regulatory scrutiny than a lower bid from its Chinese counterpart.
Euronet, which operates services like Epay, Ria, HiFix, and XE, said it will offer $1 billion bid for Moneygram, surpassing Ant-Financial's $880 million offer, and assume about $940 million of Moneygram's outstanding debt.
Ant Financial, which runs Alipay and other financial services by the e-commerce giant Alibaba Holdings, said it remains committed to its deal.
"MoneyGram and Ant Financial continue to work cooperatively under the terms of our merger agreement, and together, we are making progress on schedule towards obtaining all required regulatory and shareholder approvals," the company said in a statement to Reuters.
Moneygram said it would "carefully review and consider" the offer by 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 told Reuters.
Shares of the Nasdaq-listed Moneygram rose by nearly 25 percent to close at $15.77 on Tuesday, slightly above Euronet's cash offer of $15.20 per share and Ant Financial's $13.25 per share, indicate investor hopes for a higher bid to materialize in the future.
With headquarters in Dallas, Moneygram is one of the biggest players in the global remittance market with a large network of retail locations. It has an estimated 350,000 outlets in retail shops, post offices, and banks in nearly 200 countries and territories.
Analysts expect the potential takeover of MoneyGram by Euronet to enable the Kansas-based company to become more competitive against digital start-ups which are transforming the money transfer sector.
"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, the CEO of money transfer business Azimo, adding that Euronet's bid is "a major synergy play."
A Euronet deal also has the advantage of not requiring clearance from the Committee on Foreign Investment in the United States (CFIUS), a U.S. inter-agency panel that reviews foreign acquisitions of domestic assets for national security concerns, making it a more agreeable choice for U.S. policymakers amidst rising tensions between Beijing and the United States over trade and foreign policy.
The CFIUS has been a major obstacle for several Chinese deals in the United States and is considered a big hurdle for Alibaba's global strategy for Ant Financial, which seeks to increase its footprint in the foreign payments sector.
Earlier this month, around 20 organizations sent a letter to U.S. Treasury Secretary Steven Mnuchin, who heads CFIUS, and other officials warning against allowing Ant Financial to take over MoneyGram.
"There can be little doubt that if China is allowed to dominate the global payments market, it will use the information, technology, intelligence and economic power it obtains to the detriment of America's economic and national security," the letter said.