Airtel Africa on Thursday announced that Mastercard would invest USD 100 million (about Rs 733 crore) in its wholly-owned subsidiary Airtel Mobile Commerce BV (AMC BV).
Mastercard would hold a minority stake in AMC BV on completion of the deal, with Airtel Africa continuing to hold the majority stake, an Airtel statement said.
Sources privy to the development said Mastercard would get about 3.75 per cent stake in the company.
AMC BV is currently the holding company for several of Airtel Africa's mobile money operations and is intended to own and operate the mobile money businesses across all of Airtel Africa's 14 operating countries. The proceeds from the transaction would be used to reduce Group debt and invest in network and sales infrastructure in the respective operating countries.
"Airtel Africa, a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa, announces the signing of an agreement under which Mastercard, a leading innovator and global technology company in the payments industry, will invest USD 100 million in Airtel Mobile Commerce BV...," the statement said.
The latest deal values Airtel Africa's mobile money business at USD 2.65 billion on a cash and debt-free basis.
Mastercard - via one of its wholly-owned subsidiaries - will make the investment through a secondary purchase of shares in AMC BV from Airtel Africa. The transaction would close in two stages - USD 75 million to be invested at the first close, once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, while USD 25 million will be invested at the second close on further transfers.
Commenting on the development, Raghunath Mandava, Chief Executive Officer of Airtel Africa, said: "With today's announcement we are pleased to welcome Mastercard as an investor in our mobile money business, joining The Rise Fund which we announced two weeks ago. This is a continuation of our strategy to increase the minority shareholding in our mobile money business with the further intention to list this business within four years".
He added, "We are significantly strengthening our existing strategic relationship with Mastercard to help us both realise the full potential from the substantial opportunity to improve financial inclusion across our countries of operation".
The combination of the company's strong customer base and distribution platforms and Mastercard's products and services, innovation and know-how, would drive demand and growth in financial services for the benefit of customers and markets, Mandava noted.
The transaction is subject to regulatory approvals, and the transfer of specified mobile money business assets and contracts into AMC BV.
According to Airtel, alongside the investment, the Group and Mastercard have extended commercial agreements and signed a new commercial framework which would deepen their partnerships across geographies and areas including card issuance, payment gateway, payment processing, merchant acceptance and remittance solutions.
The transaction is in line with the Group's pursuit of strategic asset monetisation and investment opportunities and follows on the heels of an announcement on March 18, 2021, of USD 200 million investment in AMC BV by TPG's The Rise Fund, and the sale of the Group's telecommunication towers companies in Madagascar and Malawi on March 23, 2021.
"As previously announced, Airtel Africa aims to continue to monetise its mobile money business with minority investments up to a total of 25 per cent of the issued share capital of AMC BV, and to explore the potential listing of the mobile money business within four years," Airtel statement said.
Operating under the brand Airtel Money, Airtel Africa's mobile money services is a digital mobile financial services platform catering to Africa and includes mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit card and international money transfers.
The profits before tax in the full year ending March 31, 2020, and the value of gross assets as of that date, attributable to the mobile money businesses were USD 143.4 million and USD 463.2 million, respectively.
Asserting that Airtel Africa aims to explore the potential listing of the mobile money business within four years' time, the statement said "under the terms of the transaction, and in very limited circumstances (in the event that there is no Initial Public Offering of shares in AMC BV within four years of the first close or in the event of changes of control without Mastercard's prior approval), Mastercard would have the option, so as to provide liquidity to them, to sell its shares in AMC BV to Airtel Africa or its affiliates at fair market value (determined by a mutually agreed merchant bank using an agreed internationally accepted valuation methodology)".
The option is subject to a minimum price equivalent to the consideration paid by Mastercard for its investment (less the value of all distributions and any proceeds of the sale of its shares, and with no time value of money or minimum built-in) and a maximum number of shares in AMC BV such that the consideration does not exceed USD 200 million.
The deal is expected to reach first close over next three to four months. From first close, Mastercard will be entitled to certain customary information and minority protection rights.