When the feds review the pending acquisition of Dallas-based money-transfer company MoneyGram by a Chinese firm called Ant Financial, possibly as soon as September, there’s little chance they’ll decide to scuttle the $1.2 billion deal. That’s the conclusion, at least, of an analysis of the transaction’s “regulatory risk” by Elevation Securities, an institutional broker/dealer firm based in New Jersey.
A number of approvals have already been attained for the announced deal, which came in April following a bidding war for MoneyGram between Ant—the payments affiliate of Chinese billionaire Jack Ma’s Alibaba Group—and a Kansas-based company called Euronet Worldwide. Outbid Euronet alleged that Ant’s involvement with MoneyGram would pose a national security threat, for a variety of reasons, because of Ant’s Chinese origins.
It’s a charge that will draw scrutiny when the transaction faces its final hurdle: approval by the Committee on Foreign Investment in the United States (CFIUS). The obscure, inter-agency panel has the power to effectively block such foreign deals. But according to the Elevation analysis, the risk of that happening in the MoneyGram instance is “relatively” low.
Here’s why, Elevation says:
—Tight state and federal controls over the money-transfer industry, including monitoring for names on government “watch” lists and possible money-laundering activities, will continue to apply to MoneyGram, no matter who owns the company.
—Sensitive customer information won’t be at risk, because Ant has committed to continue implementing strict data-protection policies, and MoneyGram will continue to operate independently at its Dallas headquarters.
—The proximity of MoneyGram kiosks to U.S. military bases—cited as a key concern over foreign ownership—does not pose a national security risk, because “stringent … controls” are in place. Fears that bad actors could retrieve MoneyGram data on military personnel, heavy users of money-transfer services, are unfounded, Elevation contends.
—”Patent sensitivity risk” is minimal, because most MoneyGram patents on file aren’t proprietary or “a source of competitive advantage versus” market leader Western Union.
—Despite the perception that Ant Financial would be offering money-transfer services in the U.S. for the first time, the company’s Alipay subsidiary has been “an approved U.S. money transmitter in certain states since 2015 and is now approved for money transfers in 23 states” (versus MoneyGram’s 40 states), Elevation says.
The analysis stresses that, beyond a “small number of government-owned pension funds that are passive investors” in the company, Ant Financial is not owned or controlled or subject to influence by the Chinese government. So, for all the reasons cited above, Elevation concludes, “we view the regulatory risk of this deal being blocked as relatively low.”
