January 3, 2018 / 11:08 AM / a year ago

Breakingviews - Ant's U.S. march may require China-like steps

Pang Yu, a 25-year-old railway ticket inspector in Beijing, shows her phone operating Ant Check, an Alibaba-linked platform, at a cafe in Beijing, China, April 11, 2016. REUTERS/Shirley Feng/File Photo - S1BEUDPYJZAA

HONG KONG (Reuters Breakingviews) - To sustain its march on the United States, Ant Financial may have to take some China-like steps. Jack Ma’s digital-payments business must rethink its global strategy after U.S. authorities torpedoed a plan to buy MoneyGram International. Even a newly touted alliance between the two companies is at risk.

Ant and MoneyGram, which enables customers to transfer cash, said on Tuesday that despite a lengthy effort they were unable to secure approval from the Committee on Foreign Investment in the United States. Though the deal was relatively small, at $1.2 billion, it’s a setback for Ma, the founder of Alibaba, who has cosied up to President Donald Trump and sought to broaden his growing financial offshoot from China and Southeast Asia into an international network.

Ant, last valued at about $60 billion, probably will not be able to buy its way into the American money-movement and payments systems any time soon. Instead, it will have to keep forging partnerships like one it has with online and mobile-payments enabler Stripe. A “strategic cooperation” unveiled with MoneyGram at the same time as the merger termination sounds half-hearted and half-baked, though. A fresh bid from rival suitor Euronet for MoneyGram could swiftly end any such arrangement.

As Ma steadily finds new partners and perhaps even contemplates a bolder Plan B that involves building his own separate U.S. payments outfit, he could also lay the groundwork for an even bigger deal. Just as American companies for years have been forced to tiptoe into China by acquiring minority stakes, Ant could do the same with $9 billion Western Union, a MoneyGram competitor, or even $90 billion PayPal.

Owning a slice of either, without taking board seats, would potentially flout the MoneyGram decision, but also ultimately sidestep CFIUS review. It would give Ant valuable insight into the workings of the U.S. market, while making clear to the industry and investors Ant’s long-term ambitions. Tencent, whose own payments system is Ant’s biggest domestic rival, has been enlisting a similar investment strategy, buying pieces of Snap and Tesla. It may not be Ma’s first choice, but the company’s insect namesake suggests it’s ready for the complex work ahead for financial colonization.

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