 "Prosus NV")
Prosus does not have to pay any ‘break up fee’ after its termination last week of its acquisition of Indian digital payment provider BillDesk for $4.7 billion as no such clause was part of the contract, sources involved in the deal closure have said.
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As per the contract, the agreement is ‘automatically cancelled’ if the deadline for closing it is not extended and, as such, there has been no breach in its terms, they said.
Reports have said that BillDesk could go to court to seek compensation of up to $100 million for the terminated deal. Sources said that the board of the Amsterdam-based digital arm of South Africa’s Naspers did not accept a request from BillDesk for extending the deadline for closing the deal by four months because it felt a lot of ‘uncertainty’.
The sources further added that while a break up fee clause was discussed between the two parties - effective for both - it was not eventually incorporated into the contract. The deal was announced in late August 2021 but even after more than a year, the required permissions have not come.
“How many deals do you know of which take around one-and-a-half years to complete, if the extension was accepted? And even then, there is no certainty. As it is a listed entity, it is not in the interests of the shareholders,” said one of the sources.
He said that even if the contract had included a clause for compensation (which it did not), it would still have been irrelevant as the deal was automatically cancelled by Prosus after the September 30 deadline, and not before that.
Prosus declined to comment on specific issues. BillDesk did not respond to queries.
Analysts said that one reason for the deal cancellation was the meltdown of the financial technology (fintech) business globally. It has seen valuations as well as business performance decline. A source involved in the deal said Prosus did not have any discussions with BillDesk for renegotiating the terms
A successful deal would have catapulted Prosus to among the top investors in India, hitting $10 billion. Without it, the company’s total investments stand at $6.3 billion.
These investments include a 10 per cent stake in Byju’s, 33 per cent in Swiggy, 13 per cent in education technology company Eruditus, 14 per cent in Meesho, 13 per cent in Pharmeasy, and 11 per cent in DeHaat and other companies.
The current valuation of Prosus’ shares in these companies is $7.58 billion, according to analysts. People in the know say that despite the BillDesk deal cancellation, India will continue to be one of Prosus’ top markets and that it has not lost faith in fintech.
In 2021 the company was involved in 14 deals (including follow up funding), up from 5 in 2020. In 2022, up to September, it has undertaken nine deals according to Venture Intelligence.
The BillDesk saga began on 30 August 2021 when Prosus announced it was acquiring the digital payment provider for $4.7 billion by PayU - the largest acquisition deal in the digital space after Flipkart (by Walmart) in the country.
The terms of the deal were simple, say sources. The acquisition would be completed by next February and the two players had their work cut out. While PayU would get clearance from the Competition Commission of India (CCI) for the deal, BillDesk was tasked with getting the required regulatory clearances from the RBI. There were some minor requirements (not divulged) that were agreed with BillDesk which also had to be completed before the deal was closed.
The story took a twist in February 2022, as neither party was able to get clearances and an extension was needed. Sources say that after discussions, it was decided to extend the deal till September 30.
The CCI had rejected the first filing by PayU, the Indian subsidiary of Prosus, because of inadequate information. PayU had to go for a revised filing in April, but even this did not pass muster.
Three months later, things got worse when it was asked why an investigation should not be carried out which might result in modifications to ensure that the deal was not anti-competition.
Nonetheless, the CII gave its final clearance on September 5 when it approved PayU’s acquisition of 100 per cent equity share capital of BillDesk.
But BillDesk was still waiting for RBI clearances and needed more time beyond September 30. Some say that, without CCI clearance, even the regulator would not have given the clearances.
PayU’s expansion plans which it had charted out based on the acquisition have been put on hold for over a year.
