Naspers-owned Prosus terminates $4.7 billion deal to acquire BillDesk

The biggest M&A (merger & acquisition) deal in the Indian fintech space has been called off. Naspers-owned Prosus has terminated the $4.7-billion deal to acquire India’s leading payments aggregator BillDesk.

The deal between PayU, the India business of Prosus, and BillDesk was announced on August 31, 2021, and got approval from the Competition Commission of India (CCI) on September 5, 2022.

However, approval from the Reserve Bank of India was awaited. The process was to take at least 45 days.

On the termination of the agreement, Prosus in a statement said: “Certain conditions were not fulfilled by September 30, 2022, and the agreement has terminated automatically in accordance with its terms and, accordingly, the proposed transaction will not be implemented.”

This is perhaps the first time that such a large deal, which had organisations signing binding agreements, has been cancelled, that too after getting the anti-competition authority’s approval.

“It is shocking. We heard that the India teams of both the companies were also told in the morning,” said a source in the know.

An email to Prosus on what conditions were not fulfilled, along with other questions, said: “… there is very little I can say beyond what is in the statement today. For your background, the decision by the Board is final and the deal is not being reworked.”

Prosus remains committed to the Indian market and is growing its existing businesses within the region, said the company in its statement.

Industry sources are blaming the global meltdown and the changing regulatory landscape for the termination of India’s start-up ecosystem’s second-largest M&A transaction. Walmart’s acquisition of Flipkart in a $16-billion deal has been the largest so far.

Tech stocks across the globe have seen a huge fall and start-ups have been revalued. For instance, buy-now-pay-later Swedish player Klarna, which was valued at $45.6 billion as it raised $639 million from SoftBank’s Vision Fund 2 in 2021, is now valued at $6.5 billion, according to international media reports.

In the case of Prosus, the rethink might have started sometime early this year as the funding winter set in and it saw one of its largest investments in China’s Tencent getting impacted.

“Naspers has a significant stake in Tencent, which has had its own issue with the regulatory environment in China,” said a source in the know.

In September, Naspers announced it was paring its stake in Tencent. The company moved shares worth $7.6 billion for market trading on Hong Kong’s clearing and settlement system.

Promoters of BillDesk, despite repeated attempts, could not be reached for comments.

“That is another reason for Prosus to rethink the issue. The Indian payments segment is still evolving. If the CCI nod takes a year, plus the payments ecosystem is now getting built, the uncertainty is too much,” said an investor banking official.

Prosus has been a long-term investor and operator in India, putting in close to $6 billion in Indian technology companies since 2005.

Had the BillDesk acquisition gone through, its investment in the country would have been above $10 billion. Some of its other investments are in Meesho, Byju’s, DeHaat, Mensa Brands, and Good Glamm Group.

At the time of the acquisition announcement Anirban Mukherjee, PayU India head, had told Business Standard the synergies of both the companies would lead to more products being launched.

• In August 2021, Prosus had announced the acquisition of BillDesk in an all-cash deal
• The amalgamation of BillDesk with Prosus’ PayU would have created a digital payments giant with annual TPV of $147 bn
• CCI approved the deal on Sept 5, 2022; RBI nod was awaited
• Certain ‘conditions precedent’ were not fulfilled by Sept 30 (long stop date), and the agreement terminated automatically, Prosus said
• Prosus has invested close to $6 bn in India’s new-age tech firms such as Swiggy and PharmEasy since 2005