Partnerships / Acquisitions

Musical Chairs For Payments Mergers?

mergers and acquisitions

Will it be a game of musical chairs in the payments industry?

News broke Tuesday (March 14) that MoneyGram is being pursued now by Euronet Worldwide, which offered up $15.20 a share for the company. The new bid outweighs the $13.20 a share offered weeks ago by Ant Financial. Euronet pressed its case the day the new bid was announced, stating that some regulatory concerns, tied in part to licensing, would be sidestepped.

So the questions loom as to what is next. Various news outlets such as Seeking Alpha have said, citing DealReporter, that there may be seismic changes afoot in the payments sector. This would be due to the fact, the reasoning goes, that Ant Financial may look for another deal, should it lose out to Euronet, or walk away, or even if a bidding war erupts and the price offered gets too rich — and considering that MoneyGram shares were up 25 percent at this writing, one wonders how rich is too rich.

The trade press states that Verifone may get consideration as a takeout target, and perhaps Western Union may be under consideration, too. It might not be too farfetched to think that scale and reach would be key considerations for a consolation prize on this latter scenario, with MoneyGram having been snapped up.

For it is expansion that is on Ant Financial’s corporate mind. Consider that the MoneyGram deal would have given the Chinese firm presence in the United States. That hurdle may be a high one, at least for this deal. The Trump administration has signaled its desire to keep U.S. firms in the United States or under control within domestic borders, and Euronet is in Kansas.

The politics may be enough to make Ant think twice, while the price tag, thrice. The other big player in the remittance space, of course, is Western Union. The same regulatory scrutiny might come into play should that firm be targeted. The MoneyGram/Ant deal would likely have received rigorous screening via the Treasury Department through its Committee on Foreign Investment in the United States, because China is involved here. Another foreign “wrinkle” ties in with remittances to Mexico, which has also been targeted by some Trump administration saber rattling. Western Union late last year struck a deal to roughly double its retail presence in that country.

Western Union does indeed have global scale, however, and right now shares are trading up 3 percent headed into the end of the day, likely proof that traders view the firm as an Ant consolation prize. But now the cost of such expansion has jumped from just under $1 billion (MoneyGram’s market cap) to nearly 10 times that (Western Union’s market cap), indicating that paying to play on a world stage may be an expensive proposition.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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