China’s Ant Financial Services Group is to acquire US money transfer company MoneyGram after a US$880m deal was agreed.
The accepted bid represents a 20% premium on MoneyGram’s closing price on Wednesday, which valued the US company at around US$630m at the close. Citi advised Ant Financial on the deal while Bank of America Merrill Lynch acted as advisors to MoneyGram.
The Chinese finance company was spun out of Chinese e-commerce giant Alibaba in 2010 and is parent for Alipay, which handles most of the transactions on Alibaba’s online shopping sites. Its accepted bid represents a 20% premium on MoneyGram’s closing price on Wednesday.
Ant Financial claims to have more than 450m users in China and in 2016 successfully completed one of the biggest private funding rounds ever, raising US$4.5bn at a US$60bn valuation.
MoneyGram has a global network of about 350,000 locations across countries where money transfers are sent and received, enabling consumers and businesses to send cash to one another and generating revenue from transaction fees and spreads on foreign-exchange rates. It will retain its US headquarters in Dallas, Texas and continue to operate under its existing brand.
MoneyGram and its larger rival Western Union Co., the biggest players in the global remittance industry, have faced increased competition from cheaper digital alternatives such as PayPal Holdings’s Xoom, WorldRemit and TransferWise.
Confirming the deal, Ant Financial said that it would “provide consumers in over 200 countries and territories with convenient and accessible financial services, which furthers Ant Financial’s mission to promote equal access to financial services globally.” Its chief executive officer (CEO), Eric Jing, added: “We believe financial services should be simple, low-cost and accessible to the many, not the few.
“The combination of Ant Financial and MoneyGram will provide greater access, security and simplicity for people around the world to remit funds, especially in major economies such as the United States, China, India, Mexico and the Philippines.”
Commenting on the news, Ismail Ahmed, founder and CEO of money transfer specialist WorldRemit said: “This deal is a recognition of the importance of remittances as a powerful driver of economic change, at both the individual and international level.
“It’s also an interesting development for the money transfer industry as a whole. A convergence of key technological and regulatory trends is driving new merger and acquisition [M&A] activity – this merger comes after PayPal’s acquisition of Xoom in July 2015, and UAE Exchange’s merger with Travelex in January 2015.
“Remittances is one of the only industries that keeps even the poorest segments of society connected financially over long distances. It’s a US$600bn industry today and growing, which is why we expect to see more deals of this type in future.
“Remarkably only 5% today is sent online. The rest is cash, paid in over the counter or at high street agents. However, this is projected to grow six-fold to reach at least 40% in the next few years.
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