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Why Alibaba’s Bid for MoneyGram Was Rejected by the US Government

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Feb. 2 2018, Updated 9:04 a.m. ET

Ant Financial’s bid for MoneyGram blocked

Alibaba (BABA) has had a disappointing year so far after the US government panel blocked its acquisition of money transfer company MoneyGram International (MGI) over national security concerns.

Alibaba’s digital payments unit, Ant Financial, sought to acquire US-based MoneyGram for $880 million. However, it raised its bid by 36% to $1.2 billion to compete with US-based rival bidder Euronet Worldwide. In April 2017, Euronet had made an unsolicited offer for MoneyGram and lobbied US lawmakers to not grant the sale of MoneyGram to a Chinese entity due to political and regulatory risks.

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Objective of the deal

The collapsed deal acted as a significant setback for Chinese Internet conglomerate Alibaba, which was looking to expand Ant Financial’s footprint through acquisitions and partnerships. Alibaba has faced fierce domestic competition from Chinese rival Tencent Holdings’ (TCEHY) WeChat payment platform. For Alibaba, the deal was part of its New Retail strategy, which focuses on connecting offline and online channels to improve the customer experience.

MoneyGram was Ant Financial’s first significant bid in the US (SPY) and would have allowed Alibaba’s Ant Financial to connect with an international network of 2.4 billion accounts. Ant Financial added about 100 million clients in 2016 with more than 500 million current clients.

Ant Financial, which is a holding company of Alipay and other digital financial services, has partnered with several mobile payment companies in India (INDA), Thailand, and South Korea over the past year.

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