The fight for Moneygram

by Ryan McGuire via StockSnap
by Ryan McGuire via StockSnap

Ant Financial’s bid to purchase Moneygram is on the verge of failing, apparently because it’s Chinese.

So much for free markets.

Euronet (electronic payments software, pre-paid processing, money transfers) has stepped into the ring, with a $2bn offer for the remittance company. According to the FT, Euronet believes that it has a much better chance of succeeding – largely because it’s based in Kansas. (It’s interesting to note that Euronet made a bid for Moneygram 10 years ago, which was withdrawn when Moneygram made it clear it didn’t like the idea.)

Two Republican senators recently published an open letter in the Wall Street Journal warning about the consequences of allowing Chinese firms to take stakes in American enterprises.

“Unfortunately, America’s economic strength is at risk from strategic, well-coordinated and state-sponsored Chinese investments in American financial institutions. Chinese spending in the financial sector has risen dramatically and is often driven by the priorities and objectives of the Chinese government.”

The main concern seems to be the access to information that ownership of Moneygram would confer. What could the Chinese government (via its stake in Ant Financial’s possible stake in Moneygram) do with that information? Target certain individuals.

Quite why the Chinese government, for all its human rights infringements, would choose that channel to glean sensitive information is not explained. Given the increasing level of competition in remittance services and the ease with which the contributors of that sensitive information can use another service (such as bitcoin?), it’s hard to believe that they don’t have better ways to spend their intelligence resources.

An anonymous expert is cited as claiming that Chinese corporate acquisitions are “part of a broader state-led strategic effort” to gain influence in American markets. As if the massive Chinese holdings of American debt weren’t enough.

While it may be the case that the Chinese government really wants to “gain control of western investment syndicates” and use investments in remittance companies to target dissidents and their families, we should all be raising an eyebrow at the level of US interest in state intervention in market operations. After all, Moneygram’s board approved Ant Financial’s offer. But it looks like they may not have the final say.

I’m not saying that state intervention is wrong. There are cases where anti-trust legislation does help keep prices affordable and innovation humming. And certain strategic industries understandably need to stay in local hands. However, it does seem insincere to espouse capitalist free-market principles in non-strategic sectors, but only when it suits.

Going back to the deal in question, Euronet’s offer per share is higher than Ant Financial’s – $15 vs $13.25. That in itself should be enough to win, without the need to resort to nationalist instincts.

Moneygram shareholders should do well out of the fuss, as should traders. You can almost hear them rubbing their hands in glee at the thought of a bidding war. Looking further ahead, deeper coffers could help to fund innovation that helps to lower the cost of remittances – good news for businesses, individuals and globalization.

The merger may have an impact on blockchain innovation in payments. While Euronet has not been involved in any proof-of-concepts that I’m aware of, it did issue a white paper back in December 2015. Ant Financial, on the other hand, is – through various subsidiaries – relatively advanced in blockchain work, and could have embarked on interesting projects with blockchain-reluctant Moneygram.

 

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