After a year of trying to appease U.S. regulators, Ant Financial and MoneyGram have terminated their merger agreement, challenging the Chinese company’s strategy for global expansion.
The cancellation ends an attempt by Ant — the Alibaba affiliate that operates Alipay — to acquire U.S.-based MoneyGram. The deal would have given Ant a major portal into the U.S. market, but the companies said they were unable to meet the demands of the Committee on Foreign Investment in the United States.
The Ant-MoneyGram deal faced political headwinds almost immediately. The Trump administration has taken a hard line against China, and during the 2016 presidential campaign Trump frequently referred to China as a “currency manipulator.”
The regulatory process was not public, but Ant reportedly made several attempts to address concerns of U.S. regulators. Ant also faced a rival bid from Euronet, prompting Ant to boost its offer by 36% to about $1.2 billion.
“The geopolitical environment has changed considerably since we first announced the proposed transaction with Ant Financial nearly a year ago. Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger,” MoneyGram CEO Alex Holmes said in a news release.
While the release asserts MoneyGram and Ant would collaborate on strategic initiatives, the termination is a major setback for Ant’s international ambitions. Most of Ant’s moves into Western markets have been focused on existing Chinese customers who are traveling, or wish to buy Western goods through Alibaba’s e-commerce engine.
MoneyGram would have given Ant and Alipay access to clients inside the U.S., putting it in the crosshairs of Amazon, PayPal and other U.S.-based payment and e-commerce companies. Regulatory pressure on the Chinese side has made it difficult for those companies to expand in China.
Ant and MoneyGram still plan to work together. Their relationship will focus on remittance and products designed to serve underbanked customers. There will be no direct ownership relationship with MoneyGram.
Under terms of the agreement between the two companies, Ant will pay MoneyGram a $30 million termination fee.