Last January, Alibaba founder Jack Ma met with Donald Trump, then the US president-elect, to discuss helping one million small U.S businesses access Chinese consumers through the e-commerce giant's online platform.
The two companies failed to get regulatory approval from the US Committee on Foreign Investment (CFIUS), despite lengthy efforts to amend the $1.2bn merger in order to satisfy the Committee. Trump told reporters in the Trump Tower lobby that Ma was a "great, great entrepreneur".
Sources familiar with the matter told Reuters the USA panel blocked the deal on concerns about the safety of the data that can be used to identify us citizens, rejecting proposals from Ant Financial and MoneyGram that sought to mitigate such risks.
Moneygram chief executive Alex Holmes said he was disappointed by the outcome and noted the "geopolitical environment has changed considerably" in the year since the deal was announced. Most of Ant's moves into Western markets have been focused on existing Chinese customers who are traveling, or wish to buy Western goods through Alibaba's e-commerce engine.
"Despite our best efforts to work cooperatively with the US government, it has now become clear that CFIUS will not approve this merger", Holmes said in a statement.
According to Reuters, the committee's concerns centered on the safety of financial data that could be used to identify US citizens.
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Chinese companies are on a global buying spree to acquire technology and brands.
A standard CFIUS review lasts 75 days, and the companies had gone through the process three times to address its concerns.
"Lots of China's companies underestimate compliance risk and the complexity of operating in highly regulated US markets, particularly in the finance and fin tech sectors", said Jeffrey Sun, partner at law firm Orrick, based in Shanghai.
Ant Financial president, Doug Feagin, echoed the excitement around the revised partnership and said he was encouraged by the innovation opportunities it presented. Ant also faced a rival bid from Euronet, prompting Ant to boost its offer by 36% to about $1.2 billion. The potential deal was first announced in January 2016.
The Chinese behemoth was forced to raise its initial offer for MoneyGram back in April after Euronet stepped into the fray.
It is the highest profile Chinese deal to be rejected by Washington since Donald Trump came to power. Not to mention, this is proving to be an example of increased scrutiny on Chinese investment. This pegged the deal at $1.2 billion.