BillDesk-PayU's $4.7 Billion Deal: Why The Biggest M&A Deal In India's Fintech Sector Has Been Called Off

Prosus, the investment arm of South African multinational internet group Naspers, has terminated the $4.7 billion acquisition of online payments gateway firm BillDesk by Prosus¡¯ Indian subsidiary PayU Payments.

Nearly 14 months after the deal was announced in August 2021, the ¡°abrupt move¡± to call off the deal was announced yesterday. It was triggered largely by the ongoing correction in global markets that rendered the year-old transaction ¡°over-priced¡±, as per ET.

The firm¡¯s decision to pull out of the deal comes barely a month after India¡¯s anti-trust regulator, the Competition Commission of India (CCI) approved the contours of the deal.

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This ends what would have been the second-largest buyout of an Indian digital technology startup after Walmart¡¯s $16 billion purchase of a majority stake in online retailer Flipkart in 2018. This could also have become the biggest M&A (merger and acquisition) Deal in India's fintech sector.

In a note published on Prosus¡¯ website, Eoin Ryan, its head of investor relations, said: ¡°Certain conditions precedent were not fulfilled by the September 30, 2022, long stop date causing the agreement to be terminated automatically.¡±

What Triggered The Termination?

Top industry executives tracking the progress of the deal are reportedly of the view that the steep fall in the valuation of major US payments firms by up to 50%-70% in recent months is what had put the pricing of the BillDesk-PayU deal under severe pressure.

"They (Prosus) were apprehensive on the pricing of the deal given the changes in how private and public market investors are valuing new-age companies. If you take a cue from what¡¯s happening in the US, payments firms are down by over 50% in their valuation," an industry executive noted, as per the ET report.

Prosus¡¯s Ryan, while stating that "the proposed transaction will not be implemented," also wrote that "closing of the transaction was subject to the fulfilment of various conditions precedent, including approval by the Competition Commission of India (CCI). PayU secured CCI approval on September 5, 2022."

Shares of Netherlands-based Prosus closed marginally up on the Amsterdam stock exchange at euro 54 per share on Monday upon the announcement.

For the uninitiated, on August 31, 2021, Prosus announced it would acquire BillDesk for $4.7 billion in an all-cash deal to expand its footprint in the country¡¯s booming fintech sector through its payment gateway PayU.

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The merger was expected to create an online payments gateway juggernaut that would process $147 billion in annualised total payments value (TPV), almost twice that of its nearest contender Razorpay, which processes $80 billion in annual TPV, as per ET.

Last month on September 6, India¡¯s market watchdog CCI finally cleared PayU¡¯s acquisition of BillDesk after a year-long wait. PayU had to answer several questions from the regulator after the deal was announced in September 2021, and submitted a revised merger notification in April.

As per the report, the CCI nod to the deal was not expected by the Prosus team given the unusual delay it had already faced.

Prosus¡¯ $6 Billion Investment In India

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The Dutch-listed firm Prosus, which has backed the likes of Swiggy, Byju¡¯s and PharmEasy (through its venture arm), has invested $6 billion in India¡¯s technology startups since 2005. "Prosus remains committed to the Indian market and growing its existing businesses within the region," the company said on Monday.

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