Am Law Firms Can’t Save China-US Deal From CFIUS

Alipay, among the biggest international online payment systems, is owned by China-based Ant Financial Services Group. The effort by Chinese fintech company Ant Financial Services Group and Texas-based MoneyGram International Inc. to combine failed today due to nationwide security concerns, in spite of the participation of Am Law lawyers competent and skilled in regulative and antitrust law in addition to in the typically nontransparent and deceptive nationwide security evaluation procedure administered by the Committee on Foreign Investment in the United States.

Simpson Thacher & Bartlett, Vinson & Elkins, and Paul Hastings worked as legal counsel on the proposed offer, which ended Tuesday when both businesses revealed they chose to end the $1.2 billion merger because of displeasure by the Committee on Foreign Investment in the United States (CFIUS).

“Despite our best shots to work cooperatively with the United States federal government, it has actually now become clear that CFIUS will not authorize this merger,” MoneyGram president Alex Holmes stated in a declaration. The failure of the offer to progress also raises concerns about the future of China-U.S. offers. With protectionist belief and increased concern over Chinese financial investment growing in Washington, China-U.S. deal making might see a decrease as potential acquirers in China tire of being identified nationwide security threats and set their financial investment websites on business beyond the United States.

CFIUS’s evaluations are private, and MoneyGram’s declaration did not supply information. But pointing out unnamed sources, Reuters reported that the offer was canceled after CFIUS turned down the business’ proposals to alleviate concerns over U.S. people’ personal information security. Ant Financial, which runs Alibaba Group Holding Ltd.’s online payment tool Alipay, was encouraged by longtime counsel Simpson Thacher. The company’s own general counsel, Liming Chen, was worked with from Simpson Thacher 2 years earlier. The Simpson Thacher lawyers included a CFIUS group led by Washington, D.C., handling partner Peter Thomas, who in 2016 protected CFIUS clearance for China National Chemical Corp.’s $43 billion acquisition of Swiss seed giant Syngenta A.G.

Dallas-based MoneyGram was represented by Vinson & Elkins, whose group included 2 antitrust regulative partners– William Vigdor and Neil Imus. MoneyGram also looked for regulative and CFIUS guidance from Paul Hastings, according to filings with the Securities and Exchange Commission.

The collapse of the offer comes just a couple of months after President Donald Trump disallowed a China-backed personal equity company, Canyon Bridge, from getting Portland, Oregon-based Lattice Semiconductor Corp. based upon CFIUS suggestions. Quickly before that, Chinese air travel giant HNA Group Co. Ltd. made a comparable choice to cancel a financial investment in U.S. in-flight entertainment company Global Eagle following CFIUS’ displeasure. CFIUS legal representatives informed The Asian Lawyer in 2015 the increased analysis into Chinese financial investments would likely continue throughout the Trump presidency– particularly in the technology sector.

But the financial services sector is also encountering challenges from CFIUS. The Chinese corporation HNA Group has actually been attempting, up until now unsuccessfully, to get approval to purchase a managing stake in SkyBridge Capital, the financial investment company owned by previous White House advisor Anthony Scaramucci. And CFIUS is also holding up a $2.7 billion offer for China Oceanwide Holdings Group Co. to purchase Richmond, Virginia-based insurance company Genworth Financial Inc. The outlook for Chinese financial investment might look even bleaker if costs pending in Congress requiring additional analysis of foreign financial investment, especially from Chinese business, pass.

The series of rejections by CFIUS may also lead offer streams to turn away from the United States. In September, following the CFIUS restriction, Canyon Bridge reached an arrangement to purchase British Chipmaker Imagination Technologies Group Plc. for $742.5 million; less than 2 months later on in November, Canyon Bridge revealed the offer was complete. Creativity was encouraged by a London-based group at Clifford Chance, while Jones Day acted for Canyon Bridge.

Throughout a current see to China, the U.K. International Trade Secretary Liam Fox stated that Britain, too, would take a look at security problems in foreign financial investments. “But the U.K. has actually generally been an open nation, inviting of foreign direct financial investment. And we’ll continue to do that,” he stated. In MoneyGram’s declaration, Holmes stated that the geopolitical environment has actually changed significantly since it initially revealed Ant Financials proposal almost a year back.

Ant Financial and MoneyGram revealed the handle January 2017, a couple of days after Trump took workplace, when the United States company accepted an $880 million proposal from the Chinese company. Later on, the Alibaba affiliate Ant Financial raised its deal to $1.2 billion after U.S. electronic payment providers Euronet Worldwide, recommended by Gibson, Dunn & Crutcher, signed up with the bidding in March. In a declaration following Ant Financial’s withdrawal from the proposed MoneyGram offer, Euronet stated it continued to see a deal with MoneyGram as sensible, but there is no warranty any deal will be made.