MoneyGram International Inc. (NASDAQ: MGI) and Ant Financial Services Group announced on Wednesday that the two companies have ended the merger agreement due to inability to receive approval from the Committee on Foreign Investment in the United States (CFIUS). The two companies say they have gone through extensive efforts to address the concerns of the Committee.
MoneyGram shares were down 9.1 percent.
The $1.2 billion agreement takes a toll on both companies, especially Ant Financial’s parent company, Alibaba Group Holdings Ltd (NYSE: BABA). Jack Ma, CEO of Alibaba, was looking to expand Ant Financial’s payment platform to compete against Tencent’s WeChat platform by acquiring Moneygram, a global payment platform.
MoneyGram and Ant Financial also announced that the two plan to work together on new initiatives in the digital payment market that will directly help achieve both their objective to gain international consumers regardless of the merger.
The two will mainly focus around Asian countries such as China, India, and the Philippines and then expanding globally to deliver faster and reliable transactions.
“Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger,” said Alex Holmes, Chief Executive Officer of MoneyGram, “We are disappointed in the termination of this compelling transaction, which would have created significant value for our stakeholders.”
A standard CFIUS review lasts up to 75 days, and the two companies had gone through the process three times to address the concerns. After reviewing the concerns, sources say that the two companies failed to reassure CFIUS, according to Reuters.
CFIUS has not provided details on why the merger was rejected.
"We remain excited and encouraged about Ant Financial's future prospects around the world as we continue to establish new partnerships and pursue opportunities that bring innovative services to our ecosystem,” said Doug Feagin, President of Ant Financial, “While Ant Financial won't have a direct ownership relationship with MoneyGram, we look forward to working closely with the MoneyGram team to make our platform even more accessible - particularly to unbanked and underserved communities globally - and create even better experiences for our customers."