Alibaba’s digital payments arm, Ant Financial, is buying US-based MoneyGram for $880 million.
MoneyGram has about 350,000 outlets in nearly 200 countries while Ant Financial has more than 630 million users.
The takeover will need regulatory approval from the US Committee on Foreign Investment.
The inter-agency committee reviews foreign acquisitions of domestic American assets on grounds of national security.
Ant Financial CEO Eric Jing said in a statement that the marriage of the two companies will “provide greater access, security and simplicity for people around the world to remit funds, especially in major economies such as the United States, China, India, Mexico and the Philippines”.
Ant Financial has a big market share in the online payments industry in China. The acquisition could help the company extend the lead as well as expand overseas, as competition is growing in China with rival Tencent’s WeChat payment system.
Moneygram’s shares rose by nearly 9% on the news. The takeover has been approved by MoneyGram’s board of directors.
Ant Financial’s shopping spree in the United States comes against a backdrop of rising tensions between China and the world’s biggest economy.
Before he took office, Donald Trump was questioning whether the US should continue its “One China” policy, sparking fury from Chinese state media. During his presidential campaign, he threatened to impose punitive tariffs on Chinese imports.
However, Jack Ma, the founder and chairman of Alibaba, held a meeting with Donald Trump in December 2016.
While Donald Trump has been critical of China, he said he had a “great meeting” with Jack Ma, who chose to float Alibaba on the NYSE. The share sale in September 2014 was a record-breaker, as the e-commerce giant raised $25 billion in its initial public offering.
If the MoneyGram deal goes through, it will be Alibaba’s second acquisition in the United States. In 2016, Alibaba purchased EyeVerify in a $70 million deal.
EyeVerify is a start-up based in Missouri, which uses biometric authentication technology for securing user’s online data and transactions.
Alibaba’s shares closed significantly above their initial price on the NYSE on Friday, September 19.
Shares in the company made their debut in the US at $92.70, after being priced at $68 late on Thursday.
They ended the $93.89 – 38% above the initial asking price.
More than 100 million shares were traded in the minutes after the stock was launched – more than Twitter.
Earlier in the day, founder and chairman Jack Ma rang the opening bell.
The NYSE was festooned with the orange and white logos of the company to herald its arrival on public markets.
The company raised nearly $21.8 billion in its share sale, indicating strong investor appetite for China’s e-commerce giant.
Alibaba is now valued at $231.4 billion – making it significantly larger than Amazon and Facebook.
Alibaba’s shares closed significantly above their initial price on the NYSE (photo Reuters)
If Alibaba’s bankers decide to take up an option in which they can purchase 48 million shares themselves, then Alibaba’s launch will have raised nearly $25 billion – breaking the previous $22.1bn record set by China’s Agricultural Bank in 2010.
Alibaba operates a series of online marketplaces in China and elsewhere, handling more transactions than Amazon and eBay combined.
It is responsible for more than 80% of online e-commerce in China.
Alibaba’s share sale is being viewed as a way to invest in e-commerce growth in China.
Already, the country is home to the largest population of internet users on the planet – and most estimates say that only half of China’s 1.3 billion residents have signed online.
That is why investors have been angling for some time to get a piece of Alibaba – long the market leader in e-commerce in China.
However, investors are not buying shares directly in Alibaba’s companies operating in China, but rather in a holding company in Cayman Islands which has a profits contract with Alibaba.
That has made some wary, and it is one reason why Alibaba did not list on Hong Kong’s stock exchange.
Either way, the sale is expected to make millionaires out of a large number of the company’s managers, software engineers and other staff.
Currently Alibaba’s single largest shareholder is Japan’s Softbank which holds a 32% stake. Yahoo also has a stake.
Alibaba made a profit of almost $2 billion in the three months to the end of June, with sales up by 46% year-on-year to $2.54 billion.
Alibaba shares have been priced at $68, the top end of the range, in a sign of strong investor appetite for the Chinese e-commerce giant.
With trading starting on the New York Stock Exchange later on Friday, September 19, the share sale will raise $21.8 billion, making it one of the largest flotations ever.
It values Alibaba, which accounts for 80% of all online retail sales in China, at $167.6 billion.
That value surpasses such corporate titans as Walt Disney and Boeing.
The final amount raised from the sale could change, depending on the final allotment allocation. If underwriters exercise an option to sell more shares, the money raised could increase to $25 billion, beating the record listing held by Agricultural Bank of China. That flotation in 2010 raised $22 billion.
Alibaba operates a series of online marketplaces in China and elsewhere, handling more transactions than Amazon and eBay combined.
The company was formed 15 years ago by former teacher Jack Ma, who wants to use some of the proceeds to expand in the US and other markets.
Alibaba shares have been priced at $68 ahead of NYSE flotation
Trading in Alibaba shares is expected to be frenetic in the early hours after the market opens. Many experts expect the share price to go higher once trading begins as institutions add Alibaba stock to their investment portfolios.
US search giant Yahoo, already a shareholder in Alibaba, is selling some $8 billion worth of its holding in the offering, leaving it with about 16% of the company.
Japan’s Softbank is not selling for now and will be left with a 32% stake, making it the largest single shareholder.
However, control will remain in the hands of Jack Ma and other company veterans. A group of 27 manager dubbed the “Alibaba Partnership” will have the power to nominate a majority of board members.
Regulators at the Hong Kong stock market objected to this structure, which resulted in Alibaba deciding to list in New York.
Alibaba says the arrangement will help it to preserve its innovative culture.
Jack Ma’s stake is reportedly worth about $14 billion, while the sale is expected to make millionaires out of a large number of the company’s managers, software engineers and other staff.
Alibaba acts as an online marketplace for wholesalers, retailers, and small businesses, and handles e-payments and financial transactions. The company has also branched out into cloud computing and instant messaging.
Alibaba has about 279 million active buyers visiting its sites at least once a month.
Online spending by Chinese shoppers is forecast soar over the next few years. And Alibaba has plans to expand into emerging markets as well as Europe and the US.
Alibaba made a profit of almost $2 billion in Q2 2014, with sales up by 46% year-on-year to $2.54 billion.
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