February 15, 2019 / 5:24 AM / 3 months ago

Breakingviews - Ant steps around China tech backlash into Europe

Ant Financial CEO Eric Jing speaks during the Ant Financial event in Hong Kong, China November 1, 2016. REUTERS/Bobby Yip

HONG KONG (Reuters Breakingviews) - Ant Financial has taken a big step into Europe amid a global backlash against Chinese technology. Jack Ma’s $150 billion payments-to-wealth management group has snapped up WorldFirst in the UK. The deal, which comes a year after a failed bid for U.S.-based MoneyGram, revives Ant’s overseas push. But heightened European anxiety about China suggests future acquisitions may not be so easy to close.

    Ant and WorldFirst, which offers businesses and individuals services like foreign exchange transfers and currency hedging, confirmed the transaction on Thursday. Neither side disclosed any details, but an earlier Financial Times report this month said the deal would be worth roughly $700 million, citing people familiar with the matter. Based on WorldFirst’s latest financial filings from two years ago, that implies a multiple of just over five times this year’s sales, assuming revenue continues to grow at 2017’s 10 percent annual pace. That’s lower than the average sector multiple for rival payments groups in Europe, Refinitiv data show, and doesn’t factor in potential growth from WorldFirst’s recent forays into markets like Australia and Singapore.

    For Ma, the purchase could give a much-needed boost to his global ambitions. Last year the billionaire suffered an embarrassing setback after U.S. authorities torpedoed Ant’s $1.2 billion bid for remittances outfit MoneyGram, based on national security concerns. Ant has focused on catering to its 700 million-plus Chinese users at home and in popular tourist spots abroad. That gives it thin hedge against any domestic consumption slowdown, not to mention Beijing’s recent campaign to curb online financial services. With WorldFirst, Ant finally gains a valuable customer base of Western online merchants and individuals.

    Expanding that base might be tough, however. WorldFirst shut down its operations in the United States before its sale to Ant in order to avoid scrutiny from Washington, sources told the Financial Times. Whitehall may be more relaxed than U.S. regulators about the security implications of foreign investment in financial services and payments. However, U.S. allegations against telecoms-equipment giant Huawei related to cybersecurity and intellectual property theft have added to Europe’s growing unease about Chinese influence. Ant’s next step may prove slippery.

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