Thomas H. Lee Partners may still get to exit MoneyGram International, the money-transfer company it has owned for nearly a decade.
MoneyGram and China-based Ant Financial Services Group “mutually agreed” on Jan. 2 to pull their proposed $1.2 billion merger after failing to get approval from the Committee on Foreign Investment in the U.S. The U.S. government rejected Ant’s offer to buy MoneyGram due to national-security concerns, Reuters reported.
The rejection opens the door for Euronet Worldwide Inc, which was outbid by Ant last year, to make another run at MoneyGram. Euronet, however, is playing coy. In a statement Tuesday, the Leawood, Kansas, company said it continues to believe there is “compelling commercial logic” to a combination between Euronet and MoneyGram.
Euronet says, however, that “significant developments have been disclosed by MoneyGram since Euronet’s offer, and Euronet has not conducted any evaluation of the business in that time.”
MoneyGram in November reported that third-quarter revenue slid 4 percent to $398 million.
“While we continue to view a transaction with MoneyGram as logical, there is no guarantee any offer will be made or any transaction will ultimately occur,” Euronet said.
MoneyGram, Dallas, provides money-transfer services. The company has about 350,000 remittance locations in more than 200 countries. Ant wanted to buy MoneyGram not so much for its U.S. presence but to expand in growing markets outside of China, Reuters said. Euronet provides electronic payment and transaction processing services. It processed 2.7 billion transactions in 2015.
MoneyGram is unlikely to go back up for sale, two bankers and a GP said. Instead, they think the company will ultimately get sold to Euronet but not at the $1.2 billion price Ant was willing to pay, the people said.
“No one would give [MoneyGram] the price that they got from Ant,” the PE executive said.
Thomas H. Lee Partners’ investment in MoneyGram dates to March 2008. MoneyGram at the time was one of the first U.S. public companies to face serious financial troubles during the 2008 financial crisis, according to press reports. A lifeline came from THL and Goldman Sachs, which bought a majority of MoneyGram for $760 million. THL still owns more than 40 percent of the company, SEC filings said.
THL, the legendary private equity investor, recently returned to market with its next fund, Buyouts reported in December. Thomas H. Lee Equity Fund VIII is targeting $3 billion, about one year after closing its previous vehicle with $2.6 billion, Buyouts said.
Ant Financial, the digital-payments arm of Chinese e-commerce company Alibaba, initially agreed, in January 2016, to buy MoneyGram for $13.25 a share. Ant then boosted its offer to $18 a share to fend off a competing bid from EuroNet, which in March proposed a deal at $15.20 a share. In April, MoneyGram picked Ant’s higher offer, which weighed in at $1.2 billion.
The failed deal represents a stumble for Jack Ma, Alibaba’s founder and executive chairman, who wanted to use the deal to gain an edge over Chinese rival Tencent Holdings Ltd, which owns WeChat, Reuters said. Ma famously stood with Donald Trump, who was then president-elect, in Trump Tower last year and pledged that his commerce company would help create one million American jobs, the New York Times reported.
News of the failed merger caused MoneyGram’s stock to plunge $1.20, or 9.02 percent, to close at $12.11 Wednesday, while Alibaba’s shares added 19 cents to $184. Euronet, meanwhile, saw its stock surge 8.1 percent, or $6.92, to end at $92.08.
Executives for MoneyGram, THL and Euronet declined comment.
Action Item: Contact Alex Homes, MoneyGram’s CEO, at +1 800-666-3947
U.S. President-Elect Donald Trump walks from an elevator with Alibaba Executive Chairman Jack Ma after their meeting at Trump Tower in New York on Jan. 9, 2017. Photo courtesy of Reuters/Mike Segar