In the latest twist of the MoneyGram acquisition bidding war, Euronet is ramping up for a fight with Ant Financial.
In a new report, Euronet has urged the U.S. government to take a closer look at the competing bid from Ant Financial, a company based in China, stating that it raises “significant national security risks.”
Euronet Chief Executive Officer Michael Brown penned a letter to Treasury Secretary Steven Mnuchin on Monday (March 27), explaining that whoever takes over the global money remittance company would be requested to help authorities combat money laundering and terrorism financially by complying with often confidential data requests.
Brown implied that this could be jeopardized by a foreign buyer.
“A money transfer company’s ownership and leadership at the top are critical in ensuring that all of these responsibilities are carried out fully and effectively,” Brown stated in the letter, which was reviewed by Reuters.
“We feel… there are significant national security risks that merit careful evaluation for any foreign buyer of a company in this industry,” he said.
According to Reuters, Euronet maintains that an all-American deal would face significantly less regulatory scrutiny than the sale to a foreign entity that would result if the Ant Financial deal goes through.
Ant Financial, carved out from Alibaba, is on the cusp of a bidding war, even as executives from that company have said that they remain confident that their initial $880 million deal to buy MoneyGram, which was announced in January, will go through.
Euronet’s offer topped the $13.25 per share offer from Ant Financial to buy MoneyGram for $15.20 per share in cash, a $1 billion bid.
However, it was reported last week that MoneyGram’s board is continuing to recommend the offer from Ant Financial as opposed to that of Euronet. If MoneyGram pulls out of its deal with Ant, it will cost the company. MoneyGram faces a $30 million termination fee if it abandons the deal for another bid.
As the bidding war continues to heat up, strategies from both sides have emerged.
For Ant Financial, the buy impetus may come down to the desire to expand beyond China geographically, which is no surprise given the slowing of that country’s once white-hot GDP growth (and with GDP growth comes the desire to spend more and transact more, and thus a clear benefit accrues to Ant).
As for Euronet, the headlines and news stories trumpet the fact that the firm will not have to go through the regulatory process that is going to be levied by the Committee on Foreign Investment in the United States. So we can rest assured the company will not be questioned or examined as a potential risk to U.S. security. That’s what may be in it for investors: a price tag to be paid that is higher than Ant’s (for now) and absence of the gimlet eye of regulators.
What’s in it for Euronet? The same scale across the U.S. and elsewhere, but keep in mind that the agent model (i.e., 350,000 physical locations) amid MoneyGram’s network is the lure, as cash still reigns locally in so many places. The company, at last quarter, had a bit more than $100 million in net cash — so based on net cash alone as a metric, there is less room to up its offer, should it feel compelled to do so.