It is not clear what the federal government will think of the proposed $880 million acquisition of MoneyGram International Inc. by China-based Alibaba Group Holding Ltd. affiliate Ant Financial Services Group, but the transaction is likely positive news for MoneyGram shareholders, according to one industry analyst.
First Analysis Securities Corp. analyst Larry Berlin said MoneyGram being a takeout target was no surprise, but he had not considered Ant Financial, a digital financial services provider and the parent of global mobile payment platform Alipay, as a potential suitor.
"I would not have expected Alibaba, to be honest," he said. "I hadn't thought of them as a potential buyer, as being interested in the space."
The subject of MoneyGram selling itself has been around for some time. Euronet Worldwide Inc. in December 2007 made an unsolicited offer to buy MoneyGram for $1.65 billion, but its efforts eventually came to nothing as MoneyGram decided to accept a capital infusion from an investor group in February 2008. In the summer of 2013, it was reported that several private equity firms were trying to acquire the company, but no deal was ever announced. And in May 2015, rumors swirled that Western Union Co. was looking to buy MoneyGram. But just a day after Bloomberg News reported that the two sides were in early stage merger talks, Western Union said the report was inaccurate.
Berlin cautioned that the deal with Ant Financial needs U.S. government approval and given the environment in Washington, it is unclear whether the merger will experience push-back from regulators.
An Ant Financial spokesperson declined to comment on the outlook for the deal's regulatory approval process. MoneyGram was not immediately available to comment.
For MoneyGram shareholders, particularly those who bought shares about a year ago, the deal is good news, according to Berlin.
From Ant Financial's perspective, Berlin suspects MoneyGram is a good fit since it offers an added service for clients, particularly for those in China. He noted that the deal also gives Ant Financial revenue and geographic diversification, while remaining soundly in the payments space.
Robert W. Baird & Co. analyst Colin Sebastian, who covers Alibaba Group, in a note to clients said the deal is "consistent with Ant Financial's recent efforts to expand its global payments network," citing global partnerships with India's Paytm and Thailand's Ascend Money.
Sebastian pointed out that MoneyGram's brand and U.S. user base could help Ant grow usage of the Alipay digital wallet in addition to bolstering MoneyGram's Asia-Pacific transaction volume. The Baird analyst wrote that he expects Ant Financial to continue pursuing partnerships as it expands beyond mainland China.