M&A

Ant problem

Why Jack Ma’s Moneygram bid was rejected?

Jack-Ma-w

Left at the altar: Ant’s Ma

“It is a truth universally acknowledged, that a single man in possession of a good fortune, must be in want of a wife,” is the famed opening to Pride and Prejudice. Less well known is how Jane Austen completes the paragraph: “However little known the feelings or views of such a man may be on his first entering a neighbourhood, this truth is so well fixed in the minds of the surrounding families, that he is considered as the rightful property of some one or other of their daughters.”

But that empirical rule – for both human wooers and corporate dealmakers – that those with vast wealth are guaranteed a betrothal has now been trumped. Now, it seems, worries about Big Data and national security – at least in the M&A context – can lead to even the richest suitor being jilted. That explains why Ant Financial, controlled by Chinese tycoon Jack Ma – who’d promised to create one million jobs in the US in the next five years – was deemed last week an undesirable mate for the otherwise keen Texas-based remittance company MoneyGram.

The increasingly powerful Committee on Foreign Investment in the United States (CFIUS) ruled that Ant’s $1.2 billion takeover of the American firm would pose national security threats The big concern: Alibaba’s payment unit would be able to unlock a massive library of personal and financial information, including those of US government employees and military personnel.

This is despite Ant’s pledge to keep MoneyGram’s data stored in US-based servers, as well as to retain its headquarters and management team in Dallas.

But where Chinese acquisitions in the US are now concerned, any nuances as to the buyer’ background seem to be getting lost in a broader hysteria. Robert Pittenger, a Republican congressman, told Politico last year, for example, that he’s wary of Beijing leveraging MoneyGram’s database “to harass dissidents, journalists and human rights activists who dare challenge the Chinese Communist Party”. The Politico report noted that much of MoneyGram’s infrastructure lies inside or within a few miles of some of the largest US military installations, where soldiers, their families, and defense contractors wire money regularly.

Pittenger’s immediate association of Ant and the Chinese government is likely framed by the discussions surrounding China’s new cyber-security law. The regulation, which came into effect last June, requires network operators in China to cooperate with the country’s crime or security investigators. That effectively grants Chinese authorities access to data owned by private enterprises as well as foreign companies operating in China.

Critics said the law will particularly impact cross-border service providers because all information stored in the Chinese servers will need to be examined and assessed before being transferred out of the country. Multinationals had lobbied to push back the implementation of the law to 2019, so as to buy time to separate their Chinese networks from their global ones.

It did not help Ma’s cause that North Korea’s escalating missile programmes and Sino-US economic tension have soured the bromance between presidents Donald Trump and Xi Jinping. “The geopolitical environment has changed considerably since we first announced the proposed transaction with Ant Financial nearly a year ago,” said Alex Holmes, MoneyGram’s CEO.

In another blow for China Inc, America’s second largest telecoms carrier AT&T, this week pulled out of a landmark deal to distribute smartphones made by Shenzhen-based Huawei. AT&T declined to explain its withdrawal from the alliance, which was slated to be announced at this week’s Las Vegas Consumer Electronics Show, according to the Wall Street Journal. But The Information reported that “political pressure” came into play – and again, concerns about American data somehow falling into Chinese hands (see WiC168).

Last January Ma assured the World Economic Forum in Davos that Trump was “open-minded. He is listening” and that he should be given some time. The Chinese tycoon – who was treated last winter to a summit-like meeting with Trump at Trump Tower – also dismissed worries that the world’s two largest economies would clash.

Ma could be forgiven for feeling differently now…


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