A MoneyGram advertisement in Shanghai. Photo: ImagineChina
A MoneyGram advertisement in Shanghai. Photo: ImagineChina

Alibaba affiliate Ant Financial to buy MoneyGram

Indebted US company is second only to Western Union Co among money-transfer providers. Deal is valued at around US$800 million

January 27, 2017 11:16 AM (UTC+8)

Ant Financial Services Group, the payment affiliate of Chinese e-commerce firm Alibaba, has announced its intention to buy US money-transfer company MoneyGram International Inc in a deal valued at about US$880 million.

Ant Financial’s Alipay payment platform dominates the online payments industry in China and the company is looking to expand its presence overseas as competition from Tencent Holdings Ltd’s Wechat payment system heats up at home.

The offer of US$13.25 per share is pitched at a premium of 11.5% to MoneyGram’s Wednesday close.

“Since the 2009 (recapitalization), MoneyGram has had a challenging journey and has finally found a home,” Northland Capital Markers analyst Mike Grondahl wrote in a note.

MoneyGram, which started as a small money-order company in Minneapolis in 1940, is now second only to Western Union Co among money-transfer providers.

It has about 350,000 outlets in retailers, post offices and banks in nearly 200 countries and territories.

Dallas-based MoneyGram faced a serious liquidity crunch in 2008 after investing in subprime and other risky asset-backed securities, but it was rescued through a US$1.5 billion equity and debt deal clinched with Goldman Sachs and private equity firm Thomas H. Lee Partners.

Ant Financial said it would assume or refinance MoneyGram’s outstanding debt, which stood at US$937.3 million on a net basis as of September 30, according to a regulatory filing.

MoneyGram’s biggest shareholder, Thomas H. Lee Partners, which has a 44.5% stake, agreed to vote in favor of the deal, the companies said.

This would be Ant Financial’s second acquisition in the United States. Last year, the company bought EyeVerify, a maker of optical verification technology used by US banks.

Valued at nearly US$60 billion, Ant Financial has confirmed plans for an initial public offering this year and has been tapping investors for pre-IPO financing to fund expansion as Chinese consumers shift more of their banking, payments and investing online.

Alex Holmes will remain MoneyGram’s chief executive and the company will continue to be based in Dallas.

The companies said the acquisition was expected to close in the second half of 2017.

MoneyGram’s shares were trading up 9.6% at US$13.02.

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