Airtel Africa Business: Airtel Africa, a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa, on 18th March 2020 signed an agreement for The Rise Fund, the global impact investing platform of leading alternative investment firm TPG, to invest $200 million in Airtel Mobile Commerce BV (“AMC BV”), a wholly owned subsidiary of Airtel Africa Plc.
AMC BV is the holding company for several of Airtel Africa’s mobile money operations and is now intended to own and operate the mobile money businesses across all of Airtel Africa’s 14 operating countries. The transaction values Airtel Africa’s mobile money business at $2.65 billion on a cash and debt free basis.
The Rise Fund will hold a minority stake in AMC BV upon completion of the transaction, with Airtel Africa continuing to hold the remaining majority stake. The transaction is subject to customary closing conditions including necessary regulatory filings and approvals and the inclusion of specified mobile money business assets and contracts into AMC BV.
The transaction is the latest step in the group’s pursuit of strategic asset monetization and investment opportunities. Airtel Africa says it is exploring the potential listing of the mobile money business within four years. The Group is in talks with other potential investors in relation to possible further minority investments into Airtel Money, up to a total of 25% of the issued share capital of AMC BV. But there is certainty that a transaction will be concluded or as to the final terms of any transactions.
The proceeds from the transaction will be used to reduce group debt and invest in network and sales infrastructure in the respective operating countries.
Operating under the Airtel Money brand, Airtel Africa’s mobile money services is a leading digital mobile financial services platform catering to a large addressable market in Africa and includes mobile wallet deposit and withdrawals, merchant and commercial payments, benefits transfers, loans and savings, virtual credit card and international money transfers.
Key elements of the transaction
- The agreement values Airtel Africa’s mobile money business at $2.65 billion on a cash and debt free basis.
- AMC BV, a wholly owned subsidiary of Airtel Africa, is currently the holding company for several of Airtel Africa’s mobile money operations; and is now intended to own and operate the mobile money businesses across all of Airtel Africa’s fourteen operating countries once the inclusion of the remaining mobile money operations under AMC BV is completed.
- A newly incorporated investment vehicle of The Rise Fund will invest $200 million through a secondary purchase of shares in AMC BV from Airtel Africa. The transaction will close in two stages. $150 million will be invested at first close, once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, with $50 million to be invested at second close upon further transfers.
- Airtel Africa aims to explore the potential listing of the mobile money business within four years. 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 first close, or in the event of changes of control without TPG’s prior approval), TPG 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 equal to the consideration paid by The Rise Fund for its investment (less the value of all distributions and any proceeds of sale of its shares, and with no time value of money or minimum return built in) and a maximum number of shares in AMC BV such that the consideration does not exceed $400 million.
The transaction is expected to reach first close over the next three to four months. From first close The Rise Fund will be entitled to appoint a director to the board of AMC BV and to certain customary information and minority protection rights. “We are pleased to welcome The Rise Fund as an investor in our mobile money business and as a partner to help us realize the full potential from the substantial opportunity to bank the unbanked across Africa,” says Raghunath Mandava, CEO of Airtel Africa.
Yemi Lalude, Partner at TPG who leads Africa investing for The Rise Fund, added, that financial inclusion is a global issue that is most acute in Africa. “We look forward to working with Airtel Africa to enhance mobile money services, broaden its use cases, and grow into new markets,” he said.