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Uber’s rival Swvl wants to expand into Nigeria, but commercial buses pose a threat

Egyptian vehicle hailing company, @swvlapp, has announced it will be making an inroad into Nigeria’s ridesharing market to offer services that the likes of @Uber and @Boltapp_ng are yet to offer Nigerians, but it will meet a fierce challenge from yellow (commercial) bus operators.

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Swvl wants to expand into Nigeria

Egyptian vehicle hailing company, Swvl, has announced it will be making an inroad into Nigeria’s ridesharing market to offer services which the likes of Uber and Bolt are yet to offer Nigerians. However, it will meet a fierce challenge from yellow (commercial) bus operators.

The Founder and Chief Executive Officer of Swvl, Mostafa Kandil, said the company is planning to expand its market base to two or three African countries. Lagos will probably be the first location to set sail.

“The plan is to be in at least two or three more African cities by the end of the year… Lagos, Nigeria, is most likely the next market.”

Lagos is one of the biggest markets for ridesharing companies. Uber provided 30% more rides in this location than it did in London in its first 16 months of operating there.

Why this matters: Swvl is entering the market to offer bus hailing service which Uber and Bolt have yet to started to explore in Nigeria. Note that bus transportation is the most popular means of commute. Since Lagos has an estimated population of 21 million people (the largest city in Africa), the customer base offers vast revenue potential for the bus hailing market.

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Swvl will have the first mover advantage when it begins operations by the end of the year, tapping into the middle class and upper middle class; a segment that Kandil said public buses in emerging markets don’t really serve.

Note that Uber has been operating this bus service in Cairo since 2018 where the company is in competition with Swvl and Careem for demand. Uber recently acquired Careem.

What you need to know: The Egyptian tech company secured $42 million to push this expansion drive. The funding was raised from venture-capital firms such as Sweden’s Vostok, Dubai-based BECO Capital, China’s MSA and Endeavor Catalyst, based in New York.

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Swvl also partnered with Ford: The agreement will see the Ford Transit minibus as the preferred vehicle of choice on Swvl’s routes, although this partnership is within Egypt, but with the company entering Nigerian market, the usage might extend to the country as well.

The company has been active in fundraising in the past three years, securing $8 million and over $20 million in 2018 alone before securing it’s latest $42 million cash-support. Swvl’s fundraising keeps growing, which shows investors are keen on the prospect of the company.

A possible setback: While Uber and Bolt have never disclosed their reason for completely ignoring the bus-hailing service in Nigeria especially, it could be linked to low-income commuters’ preference for the yellow-buses which provide cheaper alternatives.

Despite Swvl’s attempt to position the bus-hailing service as a cheaper option compared to taxis and car-hailing, it should be known that commercial buses are different from the regular yellow taxis which were relegated by car-hailing companies. Lagos yellow buses have a stronger root among Nigerians and will remain cheaper than Swvl, regardless of the company’s price offering.

The yellow buses may be perceived as dangerous, yet they remain very reliable when it comes to accessibility. Therefore, the only thing that may endear Swvl’s service to Nigerians if it is willing to offer the home pickup option like the car-hailing service and exclude the per meter or miles form of charges which is synonymous to vehicle hailing service.

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Regardless, Swvl should not expect the same level of acceptance Uber and Bolt (Taxify) experienced in Nigeria, as this bus service disruption will hit several stumbling blocks. The challenges will range from maneuvering traffic just like commercial buses are known to do. They may also face opposition from the National Union of Road Transport Workers (NURTW), a rather strong association with political backing. This is unlike the yellow taxi association.

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About Swvl: The Egyptian app for booking buses was established by Mostafa Kandil, an engineering graduate who was a former employee of Careem.

READ MORE: As Uber plans to ban low-rated passengers, here’s how to avoid that

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

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Corporate deals

CAP Plc set to merge with Portland Paints and Products Plc.

CAP Plc and Portland Paints have taken a decision to merge their respective businesses in accordance with applicable laws.

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CAP Plc

The Board of Directors of Chemical and Allied Products Plc (CAP Plc), and Portland Paints and Products Plc (Portland Paints), have decided to merge their respective businesses in accordance with applicable laws to drive growth and expansion within the Nigerian and African markets.

This is according to a press release signed by Bolarin Okunowo, the Managing Director of Portland Paints, made available on NSE, Monday, 26th October 2020.

READ: Big players in Paints and Coatings industry suffer 52% profit loss in the first 6 months of 2020

The completion of the proposed merger is subject to approvals being obtained from the Federal Competition and Consumer Protection Commission, the Securities and Exchange Commission (SEC), The Nigerian Stock Exchange (NSE), the Federal High Court, as well as shareholders of CAP and Portland Paints.

READ: Meet the woman winning in a male-dominated paint market 

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What you should know

  • Should the proposed merger go ahead, CAP Plc will emerge as the resultant entity.
  • The proposed merger will be executed by way of a Scheme of Merger (the “Scheme”) in accordance with Section 711 of the Companies and Allied Matters Act, 2020, and other applicable laws, rules, and regulations.
  • The Scheme will involve the transfer of all Portland Paints Plc’s assets, liabilities and business undertakings including real property and intellectual property rights to CAP Plc.
  • In consideration for the transfer, CAP Plc is offering shareholders of Portland Paints a choice to receive N2.90 cash for every Portland Paints share held OR 1 new ordinary share of CAP Plc, credited as fully paid up for every 8 Portland Paints shares held.
  • The proposed consideration represents a 45% premium to the last traded share price of Portland Paints Plc on October 16, 2020, being the last business day prior to the date on which CAP Plc sent its merger proposal to the Board of Portland Paints and a 41% premium on the trading price as at close of trading on October 23, 2020.

READ: GNI lists shares on NASD after delisting voluntarily from NSE 

What they are saying

Commenting on the proposed merger, David Wright, Managing Director of CAP, said, “The decision to pursue the proposed merger, is driven by the Board’s strategic plan to aggressively grow within the Nigerian and African markets.

“We believe that the Proposed Merger presents a unique opportunity that will benefit all stakeholders, from shareholders to customers, as well as the broader economy. I am excited by the prospect of an enlarged company with a broader decorative paint portfolio covering the premium, mid-market and affordable segments and the inclusion of marine and protective coatings, all of which will benefit our customers and shareholders.”

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READ: Africa Prudential tops losers list following mark down

The Managing Director of Portland Paints, Bolarin Okunowo, submitted that “In recent months, the Board and Management of Portland Paints have evaluated various strategic options with a view to positioning our company to capture emerging growth opportunities.

“CAP Plc’s business is complementary to ours, and both companies will be better able to serve our respective customers by coming together. I believe the combination of Portland Paints and CAP will yield significant benefits for all of our stakeholders.”

Mutual shareholder

Portland Paints and Products Nigeria Plc – with 85.98% of the company’s issued share capital owned by UAC Nigeria Plc, manufactures and sells decorative, industrial, and marine/protective coatings for the construction of oil & gas industries in Nigeria. Portland Paints is the Nigerian representative of Hempel. It is listed on the NSE.

Chemical and Allied Products Plc (CAP) – a subsidiary of UAC Nigeria Plc – which holds 51.49% of the company’s shares, manufactures and sells premium and standard paints and coatings, and is the sole technological licensee of Akzo Nobel Coatings International B.V. in Nigeria. It is listed on the NSE.

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Corporate deals

Paystack acquired by Stripe for a reported $200 million in the biggest fintech acquisition in Nigeria’s history

Nigerian fintech startup, Paystack has been acquired by global fintech giant, Stripe.

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Paystack acquired by Stripe for a reported $200 million in the biggest fintech acquisition in Nigeria's history

PayStack, a Nigerian fintech startup, has been acquired by global fintech giant Stripe, in the biggest M&A deal in Nigerian tech and one of the biggest in Nigerian corporate history. Paystack was founded in 2016 by Ezra Olubi and Shola Akinlade.

This was disclosed in a press release seen by Nairametrics. The statement read in part:

“In order to help grow Africa’s online GDP, Stripe has entered into an agreement to acquire Paystack, a technology company based in Lagos that makes it easy for organizations of all sizes to collect payments from around the world.

READ: Nigerian Fintech Startup, Piggybank.ng, secures $1.1M Seed Funding

READ: How these healthcare startups are changing the narratives in the ecosystem

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“Today, more than 60,000 businesses in Nigeria and Ghana use Paystack to securely collect online and offline payments, launch new business models, and deepen customer relationships.

“Incredibly, Paystack already processes more than half of all online transactions in Nigeria.
Paystack has ambitious plans to expand across the continent and recently started a pilot with businesses in South Africa.

“Stripe and Paystack have been working closely together for some time. In 2018, Stripe led Paystack’s Series. A financing round and has provided ongoing guidance as the company rapidly scaled.”

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READ: FairMoney secures EUR 10 million seed funding, to widen mobile banking services in Nigeria 

Following the announcement, TechCrunch on Thursday afternoon reported that Stripe had raised $600 million to invest and acquire payments companies in developing nations. It disclosed that the Nigerian startup had been on Stripe’s bucket list for a while since 2018 when Stripe led an $8 million funding round for PayStack.

Paystack Co-founder Sola Akinlade told TechCrunch that the company was not up for sale when Stripe initially approached for the acquisition; however, the founders are mission-driven and believed Stripe could accelerate it. Akinlade also disclosed PayStack investors, VISA and Tencent also approached to acquire the company.

READ: 3 startup lessons from Kobo360’s $30 million fund raise

“Paystack was not for sale when Stripe approached us.

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“For us, it’s about the mission. I’m driven by the mission to accelerate payments on the continent, and I am convinced that Stripe will help us get there faster. It is a very natural move,” Akinlade said.

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READ: The “EndSARS” protests and the problem of police reform in Nigeria

Backstory

Nairametrics reported in 2016 when Paystack raised its initial $1.3 Million Seed Funding from both international and homegrown investors.

Founders Ezra Olubi and Shola Akinlade were the toast of the tech space when their company became the first Nigerian tech startup to be accepted into the world-famous Y Combinator program, based in Silicon Valley. They obtained an initial $120,000 seed funding and further technical advice at the program.

READ: #EndSARS: Nigerian firms, Start-ups donate millions in support of protests

READ: E-Settlement Partners Seriate for acquisition and deployment of 20,000 mPOS

What they are saying

Patrick Collison, CEO of Stripe, told TC that the deal with PayStack is an enormous opportunity, as African e-commerce grows by 30% every year, which would give Stripe an early footing in the region.

“This is an enormous opportunity,” he said.

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“In absolute numbers, Africa may be smaller right now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast.

READ: New report details how Nigerian fintech companies are expanding their business scopes

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“Stripe thinks on a longer time horizon than others, because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050.”

He added that Stripe is also planning  on understanding the ecosystem and keep its eyes  open so it can see where help is needed, as the company does not tie up its investments into “complicated strategic investments.”

Collison said that many companies depend on Stripe’s infrastructure, but with PayStack, the founders have organic input in running their operations.

READ: Meet Sola Akinlade, co-founder of Nigeria’s foremost payment platform Paystack

READ: Paystack explains how it will use Truecaller to verify merchants

Stripe said the announcement of the acquisition was delayed due to the #EndSARS protests across the country.

“A lot of companies have been, let’s say, heavily influenced by Stripe.

“But with Paystack, clearly they’ve put a lot of original thinking into how to do things better. There are some details of Stripe that we consider mistakes, but we can see that Paystack ‘gets it’. It’s clear from the site and from the product sensibilities, and that has nothing to do with them being in Africa or African.”

READ: Nigerian fintech companies raised $600 million in five years – McKinsey Report 

Shola Akinlade said the payments ecosystem is still broken and PayStack is still in its early days. PayStack provides payments API for companies and takes a cut from every transaction. The company has 60,000 customers so far, from SMEs to large cooperation,s and would continue to run independently.

Techcrunch said the full terms of the deal were not disclosed. However, TC confirmed that it is worth over $200 million, making it the largest tech acquisition in Nigerian corporate history.

READ: CBN to sanction exporters who default on export proceed number

What you should know

According to Crunchbase, PayStack has raised $11.7 million so far.

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Corporate deals

London Stock Exchange seals $5billion Borsa Italiana sale

The sale is aimed at dousing tensions amidst growing concerns over LSE control of the European Bond market.

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London Stock Exchange seals $5billion Borsa Italia sale

In what appears to be a landmark trade deal, the London Stock Exchange (LSE) has agreed to a €4.3 billion ($5.1 billion) with Euronext to sell Borsa Italiana. This is according to insider sources from both firms.

If successful, the deal would bring LSE a step closer to clinching approval for its $27 billion purchase of Refinitiv, which is 45% owned by Thomas Reuters. The sale is aimed at dousing tensions amidst growing concerns over LSE control of the European Bond market.

READ: DEAL: Custodian Investment agrees to buy majority stake in UPDC

This is corroborated in a statement by London Stock Exchange Chief Executive, David Schwimmer, “We believe the sale of the Borsa Italiana group will contribute significantly to addressing the EU’s competition concerns,”

Recall earlier that LSE had entered exclusive talks with Euronext last month after the Paris bourse owner saw off competition from Deutsche Boerse DB1Gn.DE and Swiss rival SIX. The deal presents an opportunity for Euronext to expand its equity operations, while it presents an opportunity for LSE to recoup the €1.6.

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The deal will afford Euronext the opportunity to commence its first fixed income training via Borsa’s bond trading platform MTS.

(READ MORE: Global stocks close mixed on growing geopolitical concerns)

Commenting on the deal, the CEO of Euronext, Stephane Boujnah said “Euronext will significantly diversify its revenue mix and its geographical footprint by welcoming the market infrastructure of Italy, a G7 country and the third-largest economy in Europe.”

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How will the deal be funded?

Euronext with a market value of around 7 billion euros, might not be able to pull an outright cash deal without a sizeable amount of debt instruments. Hence, the firm plans to issue 1.8 billion euros in debt and raise 2.4 billion euros in new equity to fund it.

READ: MTN seeking to sell stake in Jumia Technologies AG

To raise funds and specifically secure the Italian government’s support, Euronext collaborated with state agency Cassa Depositi e Prestiti (CDP) and Italy’s biggest bank Intesa SanPaolo, who will subscribe to 700 million euros of Euronext’s equity issue.

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