Ma showed them the money but failed to grab MoneyGram
Ant Finance bid fitted in with the Chinese billionaire's business philosophy and the Alibaba group's global expansion push
Jack Ma usually gets what he wants, but not this time. In a rare setback for the billionaire entrepreneur, he saw his $1.2 billion deal for MoneyGram scuppered after regulators overseeing foreign investments in the United States blocked the move.
The takeover collapsed after talks started last year between Ant Financial Services, an online company set-up by the Alibaba co-founder, and the Dallas-based money transfer giant.
Ma had to abandon his bid after failing to “obtain the required approval for the transaction from [Washington’s] Committee on Foreign Investment, despite extensive efforts to address [their] concerns.”
“China doesn’t have a reputation of providing a great deal of protection for privacy and private data,” Scott Kennedy, director of the project on Chinese business and political economy at the Center for Strategic and International Studies in Washington, told the BBC.
“It may be that Alibaba is sort of caught in the dilemma of being a company from China … It’s very difficult to shake that off,” he added.
What is surprising is that Ma did not see this coming. The business environment in the US has changed since President Donald Trump stepped into the White House with his “America First” pledge.
Last year, the pair met and the inspiration and driving force behind China’s e-commerce behemoth promised Trump he would create a million jobs there. Now, this?
As always, Ma will walk away smiling. After all, he is in the rare position of running a Chinese company with a global profile.
Give or take a few million dollars, Alibaba has a market value of around $350 billion after listing on the Nasdaq in New York four years ago.
Around the same time, Ant was born when it was rebranded from its Alipay startup days. It is now considered the world’s most valuable fintech company, according to Pension Partners, an investment advisor based in New York.
Latest data showed Ant was worth $70 billion, while Alipay has become an online payment site colossus in China with more than 500 million users.
At the top of the pyramid that Ma build is, of course, Alibaba with affiliates Ant and Alipay giving it a triple A look.
Still, the group faces intense competition in its home market from archrival, Tencent, a massive conglomerate, which has been valued at around $522 billion by FactSet, a financial data and software company in the US.
Run by Pony Ma, who is no relation to Jack, the internet group includes shopping sites, gaming, with hit titles such as Honor of Kings, and entertainment. It also operates WeChat Wallet, a major competitor of Alipay.
Ma, we are back to Jack, would be the first to admit that Alibaba has been forced to expand globally to grow after putting together partnership deals in India, Thailand, South Korea and France in recent years.
But then, what was so interesting about the MoneyGram deal was that it fitted into his philosophy of threading together online and offline businesses. He used this e-commerce technique when he set up Hema Xiansheng hybrid stores in 2015.
These traditionally-looking bricks-and-mortar supermarkets and restaurants cater not only for walk-in shoppers but also online customers with a speedy delivery service.
When you stroll into one in China, you quickly realize it is cross between a supermarket and a storage center with overhead conveyor belts ferrying products back and forth.
Ma probably had this idea in his mind when he made a move for MoneyGram, with its network of 350,000 outlets in more than 200 countries and territories with billions of accounts.
Ant and Alipay are purely online players with a reach which barely extends outside of China. Linking up with a global network with an army of local agents would fit nicely into this online-to-offline concept.
Unfortunately for Ma, national security issues were the sticking point for the Committee on Foreign Investment. Yet while the takeover deal might be dead, Ant and MoneyGram now plan to work together on initiatives involving remittance and digital payments.
“Technology companies understand the situation and are evolving in their approach. They are doing more things organically, they are doing more strategic alliances,” Jeremy Choy, head of mergers and acquisitions for China Renaissance, told Bloomberg Television. “In terms of [this] approach, it will be less direct than finding a target and buying 100 percent.”
For Ma, even in defeat, he has managed to leave the table with the prospects of success.