By Bloomberg News
Ant Financial, the Alibaba affiliate controlled by billionaire Jack Ma, stepped up its international expansion by buying U.S. money-transfer service MoneyGram International Inc.
The $880 million acquisition marks Ant’s first deal with a U.S.-listed company, as it begins to explore markets beyond a home arena it already dominates. The transaction will connect MoneyGram’s network of 2.4 billion bank and mobile accounts with Ant Financial’s customers, who use a broad suite of technology-based financial services including payments, credit and insurance.
“This gives us a very attractive businesses that’s already quite engaged with a substantial consumer base in the U.S.,” said Douglas Feagin, who runs Ant Financial’s global operations, in a telephone interview. “Remittance is a very important activity and we think this is a great way for us to build a presence around U.S. consumers.”
Ant Financial is offering $13.25 per share in cash, according to a statement Thursday. That’s about an 11.5 percent premium to MoneyGram’s closing price of $11.88 Wednesday. The company will continue to be based in Dallas and operate under its existing brand.
The deal “seems rational,” as Alibaba could help MoneyGram obtain a more robust presence in big global corridors, said Andrew Jeffrey, an analyst at SunTrust Robinson Humphrey. MoneyGram shares rose 11.5 percent to $13.25 in early trading.
MoneyGram lets consumers and businesses send cash to one another, generating revenue from transaction fees and spreads on foreign-exchange rates. MoneyGram and its larger rival Western Union Co., the dominant players in the global remittance industry, have been battling increased competition from cheaper digital alternatives such as PayPal Holdings Inc.’s Xoom, WorldRemit and TransferWise.
Ant Financial, whose Alipay handles the majority of transactions on Alibaba Group Holding Ltd.’s online shopping sites, last year appointed a new chief executive officer to steer its next phase of growth and possibly oversee a public market debut in 2017.
Formally known as Zhejiang Ant Small & Micro Financial Services Group Co., the Chinese company has begun making investments abroad, notably in India and Southeast Asia, to take its model of online finance and local services to emerging markets. Last year, executives of Ant Financial visited Silicon Valley to size up potential investments and lay the groundwork for an IPO.
Ant started out as a unit of Alibaba before Ma spun it out in 2010, inviting objections from shareholders including Yahoo! Inc.
First appeared at Bloomberg News