MoneyGram Deal Collapses Under Increased Scrutiny
Yesterday, MoneyGram and Ant Financial announced the termination of their amended merger agreement following “the inability of the companies to obtain the required approval for the transaction” from the Committee on Foreign Investment in the U.S. (“CFIUS”). In a blunt assessment of the complications the companies faced, MoneyGram CEO Alex Holmes said, “The geopolitical environment has changed considerably since we first announced the proposed transaction with Ant Financial nearly a year ago. Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger.”
As we wrote back in October, the merger faced a number of serious obstacles: increased scrutiny of Chinese acquisitions; an evolving geopolitical relationship with the Chinese on issues of trade, intellectual property and foreign policy; and a campaign by private and public officials to sow doubts about giving a Chinese company greater access to Americans’ private financial information. That said, the proposed merger also came with personal lobbying and a proposition President Trump was surely happy to hear: Jack Ma, the chairman of Ant Financial’s parent company, met with President-elect Trump shortly after the election and promised to create 1 million U.S. jobs.
The MoneyGram deal is the latest in a string of Chinese acquisitions that have been held up or blocked by CFIUS, including the proposed $1.3 billion acquisition of Lattice Semiconductor Corporation by Canyon Bridge Partners. President Trump’s promised “crackdown” on Chinese investment comes at a time when a bipartisan group of lawmakers are simultaneously working to implement significant changes to the CFIUS review process. In November 2017, Senator John Cornyn (R-TX) and Representative Robert Pittenger (R-NC) introduced the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA) that, among other things, would broaden the scope of transactions that are subject to CFIUS review.
The Senate Committee on Banking, Housing and Urban Affairs plans to hold a series of hearings on the reform bill beginning in January, followed by a possible markup in mid-February. The House Financial Services Committee is holding committee hearings on CFIUS operations as well. Taken together, foreign investment, trade policy, and CFIUS will continue to dominate the headlines in the near term.
FTI recommends that companies considering a foreign acquisition be prepared for political and regulatory scrutiny with a solid legal, public affairs, communications and government relations strategy. By presenting a clear and consistent message, strengthening relationships with influential stakeholders, and enlisting the support of credible third parties, companies can work to reduce the risks of our changing geopolitical landscape.