Prosus calls off PayU’s acquisition  of  BillDesk

BillDesk shareholders have hired law firms to duel it out in the courts, five people directly involved with the deal said

View Full Image

People familiar with the development said the decision to cancel the transaction was sudden and shocking. “On Friday (30 September) night, just two hours before the deadline, BillDesk shareholders got an email from Prosus saying that the agreement is being terminated,” one of the people said.

The deal, announced more than a year ago to create an Indian fintech giant that would handle payments worth $147 billion, received the antitrust regulator’s approval just days before the cancellation.

“While law firm AZB & Partners is representing the selling shareholders, Shardul Amarchand Mangaldas (SAM) is representing the BillDesk founders,” said a second person.

Law firm Trilegal sent the deal termination notice to BillDesk shareholders on behalf of PayU and Prosus, a third person said.

Spokespeople for BillDesk, General Atlantic, TA Associates, Temasek, Prosus, AZB, SAM, Trilegal and PayU did not respond to emailed queries.

In a statement, PayU said the deal was terminated automatically as certain conditions precedent were not fulfilled by the 30 September deadline for closing the transaction. The company, however, did not specify the conditions that prompted it to call off the transaction.

M&A agreements typically have a set of conditions that need to be fulfilled prior to completion of the transaction, termed conditions precedent. “Conditions precedent typically include various items, such as receipt of regulatory approvals, certain actions identified based on diligence and business not suffering a material adverse effect,” said Sudip Mahapatra, a partner at law firm S&R Associates.

A fourth person aware of the details said the deal was yet to receive the Reserve Bank of India’s nod. “Besides, some business metrics, too, were not met, considering the overall environment has slowed, leading to Prosus feeling the value it agreed to pay might be too high,” the person added.

Rising interest rates, high inflation, geopolitical uncertainties and fears of a global recession have whipsawed tech valuations through much of 2022, following a year of record investments in Indian startups.

Prosus has strengthened its position in India’s payments industry through PayU India. BillDesk was to be PayU’s fourth acquisition in five years after it snapped up payment technology firm CitrusPay in 2016 for $160 million; and Paysense in 2020 for $185 million.

The BillDesk acquisition was to give PayU access to its large customer base of small merchants in India. The board of BillDesk is expected to meet soon to decide the course of action, the fifth person added.

“These are competing brands, and now PayU has access to all financials as well as business information of BillDesk. Besides, with the transaction being terminated in such a fashion, BillDesk runs a reputation risk, which the company intends to protect legally,” the person added.

BillDesk was founded in 2000 by M.N. Srinivasu, Ajay Kaushal and Karthik Ganapathy. While the founders own 30.84% of the company, the remaining is held by investors such as General Atlantic, TA Associates, Temasek and Clearstone.