Alibaba affiliate Ant Financial to buy MoneyGram

(Reuters) - Ant Financial Services Group, the payment affiliate of Chinese e-commerce firm Alibaba Group Holding Ltd BABA.N, said it would buy U.S. money-transfer company MoneyGram International Inc MGI.O in a deal valued at about $880 million.

A Moneygram logo is seen outside a bank in Vienna, Austria, June 28, 2016. REUTERS/Heinz-Peter Bader

Ant Financial's Alipay payment platform dominates the online payments industry in China and is looking to expand its presence overseas as competition from Tencent Holdings Ltd's 0700.HK Wechat payment system heats up at home.

The offer of $13.25 per share is pitched at a premium of 11.5 percent to MoneyGram’s Wednesday’s close.

“Since the 2009 (recapitalization) MoneyGram has had a challenging journey and has finally found a home,” Northland Capital Markers analysts Mike Grondahl wrote in a note.

MoneyGram, which started as a small money-order company in Minneapolis in 1940, is now second only to Western Union Co WU.N among money-transfer providers.

It has about 350,000 outlets in retailers, post offices and banks in nearly 200 countries and territories.

Dallas-based MoneyGram faced a serious liquidity crunch in 2008 after investing in subprime and other risky asset-backed securities, but it was rescued through a $1.5 billion equity and debt deal clinched with Goldman Sachs Group Inc GS.N and private equity firm Thomas H. Lee Partners LP.

Ant Financial said it would assume or refinance MoneyGram’s outstanding debt, which stood at $937.3 million on a net basis as of Sept. 30, according to a regulatory filing.

MoneyGram’s biggest shareholder, Thomas H. Lee Partners, which has a 44.5 percent stake, agreed to vote in favor of the deal, the companies said.

This would be Ant Financial’s second acquisition in the United States. Last year, the company bought EyeVerify, a maker of optical verification technology used by U.S. banks.

Valued at nearly $60 billion, Ant Financial has confirmed plans for an initial public offering this year and has been tapping investors for pre-IPO financing to fund expansion as Chinese consumers shift more of their banking, payments and investing online. (

Alex Holmes will remain MoneyGram’s chief executive and the company will continue to be based in Dallas.

Citi is Ant Financial’s financial adviser, while Simpson Thacher & Bartlett LLP is its legal adviser.

MoneyGram is being advised by BofA Merrill Lynch and legal firm Vinson & Elkins LLP.

The Wall Street Journal reported earlier on Thursday that a deal was close.

The companies said the acquisition was expected to close in the second half of 2017.

MoneyGram’s shares were trading up 9.6 percent at $13.02.

Reporting by Sweta Singh and Richa Naidu in Bengaluru; additional reporting by Rishika Sadam; Editing by Martina D’Couto and Ted Kerr