InvestorQ : Why has the BillDesk acquisition been called off and what is their future plan now?
Tisha Malhotra made post

Why has the BillDesk acquisition been called off and what is their future plan now?

Aashna Tripathi answered.
1 month ago

It is official that Prosus NV (the company that owns PayU, has officially decided to call off the $4.7 billion acquisition of BillDesk. This was supposed to be one of the biggest deals in fintech, but now it looks like not happening. The ostensible reason is that certain pre-conditions that were integral to the deal, had to be met by the September 2022 deadline, which was not done. As a result, Prosus had decided to call off the deal. However, Prosus did not specify what were these conditions and how it would have impacted such a big decision of buying a company for $4.7 billion.

Interestingly, Prosus NV has in this case called off the deal after the deal was already approved by the Competition Commission of India (CCI). RBI is still pending. It looks more like Prosus getting cold feet at paying $4.7 billion for a start-up which is in an industry that is notorious for steep valuations. This is not the first case and in the recent many large PE fund investors have walked out of the deal in the final stages. That does raise a question of ethics but that is the way the markets are today. The merged entity would have been the leader in the segment with annual total payment volume (TPV) of $147 billion.

BillDesk was founded in the year 2000 by 3 former Arthur Andersen consultants viz. M N Srinivasu, Ajay Kaushal and Karthik Ganapathy in. The 3 promoters who hold 30% stake between them, were supposed to get about $500 million each in this deal, but that is not happening now. Among the other key stake holders in BillDesk, there is General Atlantic Partners which holds 14.2% stake in BillDesk. Among the other major shareholders in BillDesk, there is TA Associates which holds a 13.1% stake and the global card franchise Visa, which holds a 12.6% stake in BillDesk. For now these stakes will remain as it is.

In terms of the road ahead, the promoters have already hinted that they would sue Prosus for walking out of the deal. On the other hand, Prosus has confirmed that there was no termination fees clause. In a nutshell, it means that Prosus can just walk away from the deal for free and with zero obligation. However, the promoters and the large shareholders of BillDesk are far from amused since their IPO plans too had been contingent on this deal. The next few days could see interesting developments on this front.