By Sruthi Shankar and Anna Irrera |
U.S. electronic payments company Euronet Worldwide Inc (EEFT.O) launched a $1 billion bid for rival MoneyGram International Inc (MGI.O) on Tuesday, arguing that its all-American deal would face less regulatory scrutiny than a lower bid by Ant Financial Services Group, the financial services affiliate of China's Alibaba Group Holding Ltd (BABA.N).
Ant Financial, controlled by billionaire Jack Ma, declined to comment immediately on the move, which disrupts its plans for U.S. expansion.
MoneyGram shares surged nearly 25 percent to close at $15.77 on Tuesday, above Euronet's cash offer of $15.20 per share, indicating investors expect a higher bid to materialize. Ant Financial said on Jan. 26 it would acquire Dallas-based MoneyGram for $13.25 per share, or about $880 million.
MoneyGram did not respond to phone and email requests for comment.
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 number four 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. "Should be a major synergy play there."
Euronet has four money transfer businesses, including 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 (WU.N), 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 territories.
A Euronet deal would not require clearance by 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.
The CFIUS has been a stumbling block for several Chinese deals in the United States and was considered a big hurdle for Ant Financial. A Euronet deal is likely to be more agreeable to U.S. policymakers against a backdrop of rising tensions between China and the United States over trade and foreign policy.
"The combination of Euronet and MoneyGram offered stockholders a clear path to closing," Euronet Chief Executive Michael Brown said in a letter to MoneyGram's board. He said the current agreement with Ant carried conditions that made closing "highly uncertain."
Ant dominates China's online payment market but has been ramping up investment overseas amid fierce rivalry at home with peers such as Tencent Holdings Ltd's (0700.HK) popular WeChat Pay.
A MoneyGram acquisition would have boosted Ant's international presence ahead of a future initial public offering, allowing it to deploy its technology in the large U.S. payments market with a well-known brand.
The takeover interest in MoneyGram spilled over into its biggest competitor, Western Union, whose shares rose 3.5 percent to close at $20.27.
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."
Western Union declined to comment on Tuesday.
Any offer for Western Union by an overseas bidder, however, would still likely trigger U.S. scrutiny.
On March 10, some 20 organizations sent a letter to U.S. Treasury Secretary Steven Mnuchin, who chairs CFIUS, and other officials that warned against allowing Ant Financial to buy 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," they wrote in the letter which was seen by Reuters.
The twenty groups are mainly conservative organizations, including Richard Viguerie's ConservativeHQ.
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 payments industry with scope for more consumers to use online transfer services rather than taking cash to storefronts.
In addition to offering $15.20 for each MoneyGram common and preferred stock share on an as-converted basis, Euronet also offered to assume about $940 million of MoneyGram's outstanding debt.
Euronet has offered MoneyGram a breakup fee of $69 million if the deal is scuppered for antitrust reasons - approximately four times higher than the CFIUS termination fee that Ant Financial offered.
Euronet had first attempted to acquire MoneyGram in 2007, but the bid was ultimately unsuccessful.
Euronet shares ended little changed at $83.22 on Tuesday.
(Reporting by Sruthi Shankar and Anya George Tharakan in Bengaluru, Anna Irrera in New York, Diane Bartz in Washington, Catherine Cadell in Beijing and Liana Baker in San Francisco; Editing by Savio D'Souza and Matthew Lewis)