What's going on?
Shares of American payments provider MoneyGram fell by over 10% on Wednesday after it announced that it wouldn’t be acquired by Ant Financial, a Chinese payments company owned by e-commerce giant Alibaba. It’s possible that China’s days of investing in Uncle Sam just ain’t what they used to be…
What does this mean?
About a year ago, MoneyGram agreed to be bought by Ant Financial for $880 million. But that deal encountered some resistance as new suitors emerged and a red, white and blue flag was raised about the implications of a foreign takeover of an American payments firm.
The US government has the right to review (and possibly scuttle) acquisitions of American companies by foreign firms on national security grounds — and that’s exactly what ended up happening to the MoneyGram and Ant Financial deal. Now both have thrown in the towel, and it’s a sign that even more potential foreign acquisitions in America may be effectively doomed if even well-connected companies like Alibaba can’t clinch merger deals.
Why should I care?
For markets: Shares of MoneyGram have slumped.
MoneyGram’s stock price jumped more than 40% last spring in response to the deal speculation, but the stock has now slid back down to where it was almost a year ago. One saving grace is that Euronet, a US-based payments processor which had previously bid for the company against Ant Financial, has said that it’s still down to link up with MoneyGram (perhaps for less money).
The bigger picture: Chinese investment patterns abroad are evolving.
As growth in China has slowed somewhat and interest rates have started to go up in countries like the US, money has been flowing out of China and into major foreign investments. This outflow helped to push up all sorts of overseas investment prices — but it seems like that this era may be drawing to a close as China imposes stricter rules on taking money out of the country and American authorities are, apparently, more prepared to scupper big-ticket acquisitions.