What's going on?
A bidding war has kicked off between Ant Financial, a Chinese payments firm affiliated with ecommerce giant Alibaba, and Kansas-based Euronet Worldwide, another payments firm. The prize? MoneyGram, a US company that helps customers transfer money around the world.
What does this mean?
Back in January, MoneyGram accepted a takeover offer from Ant Financial for $880 million. However, on Tuesday, Euronet entered the fray with a bid that’s 15% higher – and it’s not too late for MoneyGram to accept that bid instead. Not only is Euronet bidding higher, it also argues that its bid is “more certain” to lead to a completed deal because the US government won’t require the same sort of national security review as it would for a takeover by a Chinese company (in other words, the US government could block a takeover by Ant Financial).
Why should I care?
For the markets: “Bidding wars” typically benefit the target company’s shareholders.
MoneyGram’s share price jumped 25% on Tuesday after the news broke, closing above the $15.20 per share that Euronet has offered to pay. Why would it trade above that bid price? Because investors think it’s possible Ant Financial will come back with an even higher bid. All of this, of course, benefits MoneyGram’s existing shareholders.
The bigger picture: This could put a wrinkle in Ant Financial’s expansion plans. (tweet this)
Ant Financial has over 450 million users in China, but has only recently begun aggressively expanding into other countries. It has plans to reach two billion users over the next ten years and the planned acquisition of MoneyGram was meant to be a big step in that direction. Now it must decide if it’s prepared to pay more for MoneyGram, seek to buy a different company or, perhaps, rethink its expansion strategy.