3 min read.Updated: 31 Aug 2021, 06:49 PM ISTALEXANDRA WEXLER, The Wall Street Journal
BillDesk acquisition comes after pandemic fueled rapid growth in digital retail transactions
European technology giant Prosus NV said it struck a $4.7 billion deal—its largest-ever acquisition—to buy Indian payments platform BillDesk, the latest investor bet that more and more consumers will conduct transactions online.
Amsterdam-listed Prosus, which is majority owned by South African holding company Naspers Ltd., said its payments and fintech subsidiary PayU will pay 345 billion rupees, equivalent to $4.72 billion, for BillDesk in an all-cash deal. Prosus shares rose 5% Tuesday following the announcement.
The acquisition will bring Prosus’s cumulative investment in Indian tech to more than $10 billion since 2005, as the company seeks to profit from what was the world’s fastest-growing major economy before the coronavirus pandemic.
BillDesk, which currently competes with Prosus’s PayU in India, allows its customers to aggregate invoices and organize, pay and manage their bills in one place. Founded in 2000, it generated an after-tax profit of $36.8 million in the year ended March, while its net assets were valued at about $256.9 million largely in cash and cash equivalents.
“Backing a local player with a long history in a market is good," said Neelash Hansjee, portfolio manager at Old Mutual Equities in Cape Town, South Africa. “This transaction seems positive, but pricey."
Executives said the hefty price tag was justified because of the scalability of the combined businesses.
“Scale is a huge reason to do this transaction," Bob van Dijk, chief executive at Naspers and Prosus, said in an interview with The Wall Street Journal. He said the combined company would be in the top 10 payment processors in the world.
Digital retail payments are growing rapidly in India, an economy of more than 1.3 billion people that the International Monetary Fund expects to expand by 9.5% this year. Growth in online payments has been boosted by the pandemic, as shoppers world-wide avoided stores and instead turned to the internet to make purchases.
Affordable handsets and cheaper data have also driven the uptick in online payments in India, Mr. van Dijk said.
“That sort of rapid adoption of online payments is very much the reason behind this acquisition," he said.
The proposed acquisition of BillDesk will raise PayU’s total payment volume to about $147 billion annually, Prosus said. In the 12 months ended March 2021, PayU, which operates in more than 50 markets, increased its total payment volume by 51% to $55 billion across India, Latin America, Europe, the Middle East and Africa.
The fintech sector in particular has seen a boom. In June, Sweden’s buy-now-pay-later payments specialist Klarna Bank AB said it had received $639 million in a new funding round led by SoftBank Group Corp.’s Vision Fund 2, valuing the company at $45.6 billion—a more than eightfold increase in its valuation since 2019. In March, fintech company Stripe Inc. raised $600 million, valuing it at $95 billion.
Prosus, one of Europe’s most valuable tech companies, is best known as the largest shareholder in Chinese internet and videogaming giant Tencent Holdings Ltd. Prosus has had an appetite for deal making since it sold $14.6 billion worth of shares in the Chinese internet giant in April. The sell-down, its second in three years, cut its stake in Tencent to 29%, currently valued at about $170 billion.
Mr. van Dijk said the windfall from the Tencent stock sale would be used to scale and expand the company’s online classifieds, payments, food-delivery, retail and education businesses, and fund mergers and acquisitions.
In August, Prosus finalized a $1.8 billion acquisition of Stack Overflow, an online community for software developers.
In 2019, Naspers created Prosus to hold its international assets—the stake in Tencent, along with investments in tech companies such as Russian social-media operator Mail.ru Group Ltd., German food-delivery business Delivery Hero and U.S. online marketplace Letgo.
This story has been published from a wire agency feed without modifications to the text