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Business News

DEAL: Visa to acquire 20% stake in Interswitch, valuing it at $1 billion 

Visa is thought to be paying $200 million, valuing Interswitch at about N1 trillion. Helios bought 52 percent of Interswitch for $96 million in Dec. 2010. 

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Verve, DEAL: Visa to acquire 20% stake in Interswitch, valuing it at $1 billion 

Visa is set to acquire a 20% stake in Interswitch, a deal which will see Interswitch become Africa’s latest technology ‘unicorn’. Visa is thought to be paying $200 million, valuing Interswitch at about $1 billion (N360 billion). Helios bought 52 percent of Interswitch for $96 million in Dec. 2010. 

Interswitch reportedly generates annual revenue of N30 billion, suggesting that the current value is about 10x its current revenues. Interswitch is also now valued higher than FBNH (N208 billion), UBA (N225 billion) and Access Bank (N327 billion). Zenith Bank still owns a 5% stake in Interswitch and is currently valued at N538.4 billion. 

According to SkynewsVisa and Interswitch are in advanced talks about a transaction that could be announced this week.

Snippets of Interswitch Results.

Interswitch reported a profit after tax of N5.3 billion in 2018 and has an impressive EBITDA margin of 43%.

The deal: According to the report, the move by Visa to acquire a 20% stake is targeted at becoming a cornerstone investor in Interswitch ahead of the company’s prospective initial public offering (IPO) in London next year.  

  • Recall, in an earlier article published on Nairametrics, it was reported that Interswitch has revived its plans for an initial public offering, via a dual listing on the Nigerian Stock Exchange and London Stock Exchange 
  • According to the report, Interswitch has hired financial advisers, JPMorgan Chase & Co, and Standard Bank Group, as firms working on the potential initial public offering. 
  • Firms typically hire financial advisers when they decide to list on the stock market to help with valuation, marketing of the offer, compliance with listing rules, and other regulatory filings. 

A competitive move: While Visa’s move to acquire a 20% stake in Interswitch is largely connected to the planned IPO, this is also a move by the company to make a strong statement against its closest rival, MasterCard 

  • Earlier in the year, MasterCard had invested $300m in Dubai-based Network International ahead of its stock market debut in London. Network International, is the largest payment processor in Africa and the Middle East.  
  • The rush to build stakes in African businesses by Visa and MasterCard is being driven by a desire to take advantage of established platforms in markets that are both fast-growing and under-penetrated. 
  • Interswitch is considered Nigeria’s first unicorn in the Fintech space and has dominated Nigeria’s payment channels gateway for over a decade.  
  • It is also one of the largest Africa-focused electronic payments and infrastructure companies, with point-of-sale terminals, online consumer payment platforms and its own card, Verve. 
  • Hence, Interswitch’s move to cede a 20% stake to Visa is a huge competitive move to increase its market penetration.  

 [READ: Interswitch reignites plans to launch IPO in 2019] 

Deal book 300 x 250

Verve, a Nigerian Pan-African financial technology and payment card brand owned by Interswitch Group, is the biggest domestic debit card scheme in Africa, with more than 19 million cards active on its network. Hence, an investment by Visa will facilitate the formation of a strategic partnership to target the fast-growing African digital payment market. 

Recently, more Fintech firms like Flutterwave and Paystack have been playing increasing roles in facilitating online payments in Nigeria. The 20% stake acquisition by Visa also implies that Interswitch is going all out to increase its dominance within Nigeria’s Fintech space. 

Interswitch is about 70 percent-held by London-based private equity group Helios Investment Partners LLP, South Africa’s Adlevo Capital Managers LLC and the International Finance Corp., a unit of the World Bank.


Correction: An earlier version of this article erroneously valued Interswitch at N1 trillion instead of $ 1billion. The error has now been corrected.

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

1 Comment

1 Comment

  1. George C Thorpe

    November 12, 2019 at 3:47 pm

    I would have thought this company would be valued at close to 5x this value, noting the potential for growth and the fact that it is already profitable. Similar fintech’s in other developing market do not the synergies and entrenched position that Interswitch has in the financial eco-system. When we compare this with the fact that a large proportion of the population is either unbanked or underbanked, EBITDA for Interswitch could rise significantly in the future.

    Is country risk impairing valuation here or the fact that funding rounds have not been as sexy as Fintech’s like GoJek? Perhaps its both.

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Companies

Nigerian Breweries to pay Heineken BV mega dividend of N2.9 billion

The parent company of Nigerian Breweries Plc, Heineken B.V., is set to earn N2.9 billion in dividends for the financial year ended December 2020

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To protect margins, Nigeria’s top brewers are set to increase prices , Nigerian Breweries, Economy: Local corporates taking advantage of the low yield environment , Nigerian Breweries goes to the retail lab, Analysis: Nigeria Breweries, the glory days are gone

The parent company of Nigerian Breweries Plc, Heineken B.V., is set to earn a mega N2.9 billion in dividend for the financial year ended December 2020.

The multinational brewing company, headquartered in the Netherlands is the single majority shareholder of Nigerian Breweries, with 3,034,100,564 units of the total issued shares of its subsidiary.

This puts the ownership stake of the Dutch multinational at 37.94%, ahead of Distilled Trading International B.V. and Stanbic IBTC Nominees Limited with 15.47% and 11.37% ownership stake respectively.

In case you missed it

Recall that the Board of Directors of Nigerian Breweries Plc a in a statement released via the Nigerian Stock Exchange proposed a final dividend of 69kobo per share. This puts the total dividend payout of the company at N94 per share for the financial year 2020 (interim: 25kobo). When converted to dollars, the dividend amounts to about $6.93 million based on an exchange rate of N411.88/$1.

Despite the headwinds the company suffered in 2020, the brewer was able to maintain its tradition of dividend payment to shareholders in 2020, despite taking a major shock in its profit during the year (54%).

  • Nigerian Breweries in 2020 delivered a consistent result in terms of revenue, amidst the ongoing COVID-19 pandemic which disrupted supply chains globally.
  • The net revenue of the leading brewing company increased by 4.3% in 2020 (N337 billion), compared to FY’19 figures (N323 billion).
  • The increase in Nigerian Breweries’ costs of goods sold, as reported in its audited financial results, as well as the increase in its finance cost pressured the brewer’s profit in 2020.
  • The increase in Nigerian Breweries’ cost of goods sold can be attributed to currency devaluation spiked by foreign exchange scarcity, this exerted upward pressures on the costs of imported input materials such as sorghum and sugar – which are not fully produced locally.

What you should know

  • Nigerian Breweries Plc, a company formed out of a contract for incorporation signed by UAC and Heineken in November 1946, has grown to become the largest brewer in Nigeria in terms of market size.
  • Thanks to the merger between NB and Consolidated Breweries in 2014, it has nine fully operational breweries from which its products are produced and distributed to all parts of Nigeria, with additional two malting plants in Aba and Kaduna – taking its total operation in Nigeria to the 11.
  • The Merger also increased the company’s brand portfolio to 19 brands, while its Stock Keeping Units -SKU’s- increased to 59.
  • Aside from producing to satisfy and meet local consumption and demand, the Company has an export business that dates back to 1986.

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Manufacturing

Lafarge Africa gains N71 billion in market value in three trading sessions

The market capitalization of Lafarge Africa Plc has gained N70.87 billion in the past three trading sessions on NSE.

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Lafarge Africa provides grant for startups, Lafarge Africa’s latest earnings report reveals 8.5% decline in gross profit , Lafarge Africa gets new CFO one month after resignation of former finance director, Lafarge Plc reveals why it invited Italian man with Coronavirus to Nigeria, Lafarage Africa group Plc posts a revenue of N213 billion in 2019, profit up N17 billion, Lafarge moves to sell 35% shareholding in Continental Blue Investment Ghana Limited

Lafarge Africa Plc, one of the leading cement manufacturers in Nigeria, has gained almost N71 billion in the past three trading sessions on NSE, pushing the market capitalization of the cement manufacturer to N384.98 billion.

Lafarge whose shares peaked at N30.3 this year, saw its share price increase from N19.5 on the 3rd of March 2021 to N23.90 at the close of trading activities on March 8 2021 after enduring a massive sell down in recent weeks.

According to data tracked on the NSE website, this move led to a N70.87 billion gain in the market capitalization of Lafarge Africa in three trading sessions on the local bourse.

This impressive gains in Lafarge’s shares and market value were triggered by buying pressures from bargain hunters who took position in the company after its share price slumped to N19.5 per share.

  • At the time of writing this report, Lafarge was the tenth most capitalized company on NSE with a market capitalization of N384.98 billion, behind Nigerian Breweries with a market capitalization of N395.85 billion.
  • A total of 5,380,311 units of Lafarge ordinary shares worth N129,602,973.90, were exchanged on the bourse in 185 deals on Monday 8th March 2021.
  • The shares of the cement manufacturer gaining a total 7.66% or N1.7 to close higher at N23.9 on the 8th of March 2021.

What you should know

  • Lafarge Africa Plc, a subsidiary of LafargeHolcim, a world leader in building materials, is a leading cement manufacturing company in Sub-Saharan Africa with a current installed cement production capacity of 10.5Mtpa.
  • The cement manufacturer has a wide operational footprint in Nigeria strategically positioned in three Geo-political zones in the country which include; the South West (Ewekoro and Sagamu in Ogun State), North East (Ashaka, in Gombe State), South East (Mfamosing, Cross Rivers State).
  • The company also has a ready-mix operation in Lagos, Abuja and Port Harcourt.

In an effort to cut down on deadweight cost, the Board of Lafarge Africa Plc has resolved to sell off its 35% stake in Continental Blue Investment Ghana Limited – a move that will see the company cut down on costs impacting the Group’s profit.

This is not the first time the company has had to sell off an unproductive investment, in August 2019, Lafarge Africa sold off all its stakes in Lafarge South Africa Holdings (LSAH).

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