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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%.

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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] 

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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.

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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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Energy

TCN restores collapsed electricity grid

TCN has now restored the electricity grid system which collapsed across the country over the past weekend.

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TCN MD Abdulaziz, four other directors receive appointment letters

The Transmission Company of Nigeria (TCN) has restored the collapsed electricity grid system across the country.

This was disclosed by the Acting Managing Director of TCN, Mr Sule Abdulaziz, during a media briefing on Wednesday.

According to the TCN boss, the system which collapsed on Sunday evening was restored within 40 minutes of the incident.

He said, “The company immediately went into action and stabilised the system in Abuja, before other parts of the country. There is nothing strange but it is normal for a system to collapse and that can happen in any country of the world.

“Since I came on board, we never had any system collapse and this one that happened on Sunday was restored immediately which is the fastest system collapse recovery. We are guarding the grid, we don’t want the system collapse to happen, but when it happens, the most important thing is what was done and how it was done to restore the system.”

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What you need to know

Three days ago, Nairametrics reported that the recent power blackout in the country was due to multiple trippings.

General Manager, Public Affairs, TCN, Ndidi Mbah, who made the announcement through a statement said the company had started the process of restoration to the national grid.

Mbah pointed out that the places that power is yet to be restored were Calabar, Makurdi, Jos, Gombe, Yola, Ugwuaji and Maiduguri axis.

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She stated, “The Transmission Company of Nigeria (TCN) regrets to inform electricity consumers nationwide that at 11:25 am today, the nation’s electricity grid experienced multiple trippings, which led to the collapse of the system.’

“TCN has since commenced grid restoration; power has been successfully restored to every part of the country, except Calabar, Ugwuaji, Markurdi, Jos, Gombe, Yola, and Maiduguri axes. The effort is however ongoing to ensure full restoration nationwide.”

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Energy

N250bn to be spent to fund compressed Natural Gas infrastructure

The CBN is to make available the sum of N250 billion to fund Compressed Natural Gas infrastructure.

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The Central Bank of Nigeria (CBN) is poised to make available the sum of N250 billion to fund Compressed Natural Gas infrastructure.

This move is in a bid to expand gas use and cut reliance on imported fuel, as the government looks forward to offering free conversion to enable some cars run on gas.

It is expected that by 2021, about 1 million cars would have been converted from PMS to Autogas for free.

The National Gas Expansion Programme (NGEP) launched by President Muhammadu Buhari, is part of the country’s effort to free itself of costly gasoline subsidies and conserve the hard-earned foreign reserves from petroleum product imports, making it imperative to focus on gas as an alternative fuel.

(READ MORE: Nigeria to import petroleum products from Niger Republic, sign MoU on transportation, storage)

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What they are saying

According to the Group Managing Director (GMD) of Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari,

“Select NNPC stations across the country will offer free conversion of ‘some cars’ to enable them to run on liquefied petroleum gas (LPG) or compressed natural gas (CNG). There are currently 80 locations in the country capable of fuelling the vehicles.”

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Bottom line

This is a welcome development as it is cleaner, safer, and affordable to run the cars on gas.

It would also, to a large extent, conserve the foreign reserves being depleted from huge petroleum product imports, as well as offer millions of job opportunities.

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Companies

ABC Transport to raise N1.4 billion through rights issue

ABC Transport Plc has secured the approval of its shareholders to raise additional capital through a rights issue.

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The Board of Directors of ABC Transport Plc has secured the approval of its shareholders to raise additional capital through a rights issue from existing shareholders.

This disclosure was made by the board of ABC Transport in a notification issued by the Company’s Secretary, Onyekachukwu C. Chigbo, after announcing shareholders’ resolutions at its 27th Annual General Meeting (AGM), held on Friday 27th November 2020.

According to the information contained in the notification, the rights issue is N1.4billion, which could be raised via the issuance of shares and debt securities as determined by the Directors of the firm.

However, the rights issue is subject to the approval of regulatory authorities.

What this means

A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. This type of issue gives existing shareholders the “rights” to purchase new shares at a discount to the market price on a stated future date.

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However, shareholders are not obligated to exercise this right.

In this regard, the company may decide to use the additional capital raised from these offerings to existing shareholders to acquire assets, make a take-over, repay debts or save itself from bankruptcy.

This is expected to strengthen the company’s balance sheet, free up capital for the management to execute revenue, and profit optimizing projects, plans, and strategies.

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What you should know

  • It is important to know that the board decided to raise additional capital after it had secured shareholders’ approval to increase the company’s authorized share capital from N1billion to N2.5billion by the creation of 3billion additional shares of 50 kobo each, ranking pari-passu in all respects with the existing shares in the Company’s equity.
  • In this regard, clause 6 of the Company’s Memorandum of Association and clause 5 of the Articles of Association respectively, will be amended to reflect the increase in the Authorized Share Capital.
  • This amendment will be done by deleting the words, “the authorized Share Capital of the Company is N1billion divided into 2billion ordinary shares of 50 kobo each,” and substituting therewith the words “the authorized Share Capital of the Company is N2.5billion divided into 5billion ordinary shares of 50 kobo each.”

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