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Thursday, April 6, 2017

Euronet versus Ant: Which is safer for U.S. financial networks?

In January 2017, when Ant Financial Service Group, a subsidiary of China’s Alibaba Group Holding Ltd., entered into an $800 million agreement to acquire Dallas-based MoneyGram, neither company envisioned a bidding war would ensue. However, in March, Leawood, Kan.-based Euronet Worldwide Inc. offered 15 percent more –$1 billion – for the money transfer business, throwing the agreement between Ant and MoneyGram into question.

Industry observers stated that MoneyGram’s board of directors supports the proposed merger with Ant, but the company also entered into confidential talks with Euronet to explore a potential deal with that suitor.

Two competitors’ pros, cons

Joining Ant Financial could extend MoneyGram’s reach into the Chinese market with Ant Financial’s existing Alipay service. The deal would also allow Ant to expand its presence in the United States. In 2016, Ant entered the U.S. market by investing in EyeVerify Inc., a biometrics startup. Since then, Ant has maintained the company’s Kansas City’s headquarters and hired 20 new employees.

In an open letter to MoneyGram, Ant wrote that it has made significant investments in EyeVerify and “helped grow this American startup into a stronger company” and that it plans to do the same with MoneyGram. “[W]e are excited to help MoneyGram expand its business globally for the digital future of the remittance industry,” Ant wrote.

Euronet claimed that in addition to offering substantially more money, a merger between Euronet and MoneyGram would create a more valuable business. "The combination of these highly complementary businesses would create a very well-positioned global payments company that would benefit customers and employees in the United States and around the world," Euronet wrote in a press release.

Regulatory hurdles

Euronet also pointed out that as an American business, it would have fewer regulatory hurdles to surmount in acquiring MoneyGram. Euronet Chief Executive Officer Michael Brown noted that MoneyGram's new owner would be asked to help law enforcement combat "terrorist financing" and money laundering by complying with highly confidential data requests. "We feel ... there are significant national security risks that merit careful evaluation for any foreign buyer of a company in this industry," Brown said.

Two members of the U.S. House of Representatives urged the Committee on Foreign Investment in the United States to carefully examine the deal with Ant, with an eye for any potential security risks.

The Ant Financial proposal “merits careful evaluation as it would provide Chinese access to the U.S. financial infrastructure, a move that would pose significant national security risks if completed,” Congressman Kevin Yoder and Congresswoman Eddie Bernice Johnson wrote in a letter to U.S. Treasury Secretary Steve Mnuchin.

In its own letter, Ant endeavored to allay concerns about data security. “Any data collected on MoneyGram users in the U.S. will continue to reside on the same ironclad U.S.-based servers that meet the high security standards your customers trust today,” the company said.

Should MoneyGram determine Euronet's bid is superior, Ant Financial will have four business days to decide whether to submit a counter-offer. end of article

Editor's Note:

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