One of the largest merger and acquisition deals in the financial technology space has fallen through. Prosus NV, which owns PayU, on Monday said it has terminated its $4.7-billion (about `38,400 crore) deal to acquire Indian payments firm BillDesk after certain conditions were not met by the September-end deadline.
The acquisition would have been the country’s second-largest Internet deal after Walmart acquired Flipkart for $16 billion in 2018.
Prosus had on August 31, 2021 announced the acquisition of BillDesk in an all-cash deal to expand its footprint in India’s growing fintech sector under the umbrella of its payment gateway PayU. This would have been the largest acquisition for Prosus, a Dutch e-commerce firm.
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The deal was approved by the Competition Commission of India (CCI), which was one of the conditions precedent, on September 5. However, it was yet to receive the approval of the Reserve Bank of India. Prosus did not specify which conditions were not met.
“Closing of the transaction was subject to the fulfilment of various conditions precedent, including approval of the CCI. PayU secured CCI approval on September 5, 2022. However, certain conditions precedent were not fulfilled by the September 30, 2022, long stop date, and the agreement has terminated automatically in accordance with its terms and, accordingly, the proposed transaction will not be implemented,” Prosus said in a statement.
A condition precedent is a stipulation that must either occur or be met by either party to ensure progress or execution of a contract.
The amalgamation of BillDesk with PayU would have created a digital payments firm with an annual total payment volume (TPV) of $147 billion. Its closest rivals in India such as Razorpay and CCAvenue, which is owned by Infibeam, are estimated to have an annual TPV of over $65 billion and $18-20 billion, respectively.
Prosus, majority owned by Naspers, serves more than 450,000 merchants with over 100 payment methods. It has been a long-term investor and operator in India, investing close to $6 billion in technology companies like Swiggy, and Pharmeasy since 2005, it said.
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BillDesk, founded by three consultants from Arthur Andersen LLP — MN Srinivasu, Ajay Kaushal and Karthik Ganapathy — in 2000, benefited from a surge in growth in digital payments as smartphone adoption grew and Internet access became ubiquitous. The founders would have collected $500 million each from the deal.
Prosus said it remains committed to the Indian market and growing its existing business within the region.
Launched when the term fintech didn’t even exist, BillDesk — which counts private equity firm General Atlantic as its single-largest shareholder with a holding of about 14.2% — is said to have the largest roster of business clients among payment gateways in India.
It provides solutions ranging from settlements, collections, reconciliation, and auto settlements. It also partners with companies in categories such as billing, utility payments, direct-to-consumer procurement, government payments, financial services, and telecom. TA Associates held a 13.1% stake and Visa 12.6% in the firm. The three founders had close to 30% shareholding.