CFIUS Blocks Alibaba’s Attempted Acquisition of MoneyGram, Citing Data Safety Concerns

On January 2, 2018, the Committee on Foreign Investment in the United States (CFIUS) reportedly blocked the acquisition of financial technology company, MoneyGram International, by Alibaba’s financial arm, Ant Financial Services Group.  According to sources cited by Reuters, the deal was rejected over data security concerns, particularly data that can be used to identify and track U.S. citizens.  Both parties agreed to terminate the deal following the CFIUS decision.

CFIUS has strengthened its scrutiny of Chinese foreign investment and M&A activity in the United States, as evidenced in the rejection of other deals, such as the attempted acquisition of Lattice Semiconductors by a private equity firm linked to the Chinese Communist Party.

Nonetheless, Chinese technology firms have made significant inroads into the financial technology (fintech) sector in other parts of the world (notably Asia) as well as in more low-profile cases in the United States.  According to a report issued by Citigroup, China accounted for more than 50% of global fintech investments in 2016, surpassing the United States for the first time.  Some of Alibaba’s most critical recent investments include:

  • In June 2017, Alibaba increased its stake in Southeast Asian fintech company, Lazada Group, to 83%.  The company also acquired several of the company services and rebranded them as Alipay.  One example is helloPay, which was acquired by Ant Financial for an undisclosed sum of money.  The newly rebranded firm operates across the region in Singapore, Malaysia, Indonesia, and the Philippines.
  • In May 2017, Ant Financial increased its stake in Indian telecommunications firm, One97 Communications, to 45%.  One97 owns Paytm, one of India’s leading financial technology and e‑commerce platforms that is currently at the forefront of the country’s drive for a cashless economy.  Alibaba owns a majority 60% stake in Paytm through One97 and other independent investment in the payment service.
  • In November 2017, Alibaba participated as a lead investor in a $10 million Series A investment round in Kneron, a California-based artificial intelligence startup.

The above IntelTrak image demonstrates Alibaba/Ant Financial’s growing global footprint.