March 7, 2011

Shareholder banks make 1400% profit in Helios/Interswitch deal

Stories BaBabajide Komolafe

Shareholders of Interswitch Nigeria Limited made over 1400 per cent return on their initial investment in the company in the recent acquisition of majority stake by Helios Investment Partners.

The Helios/Interswitch deal as been described has the largest electronic payment transaction in Africa.

Investigations revealed that a shareholder bank in the company with initial investment of N30 million in 2002 sold 75 per cent of its holding to Helios for N4.3 billion.

Established in 2001 and commenced operations in 2002, InterSwitch is the nation’s first and foremost electronic funds transfer and transaction processing and switching company. It is presently the only switching and processing company connected to all banks in the country as well as to over 10,000 ATMs and 11,000 PoS terminals.

Prior to the acquisition, the company was owned by seven banks and two non-bank firms.

The banks are First Bank, Union Bank, UBA and Zenith Bank. Others are Guaranty Trust Bank, First City Monument Bank, Wema Bank.

Other shareholders of the foremost electronic payment switching company are Accenture and Techinvest, the investment arm of Telnet, which initiated the company.

In an attempt to acquire majority stake in the company, Helios Investment partners, an Africa-focused investment firm, made generous offer to shareholders, which prompted the banks to sell off completely or some of the shareholding in the company.

One of the banks which invested N30 million hitherto had 20 per cent shareholding in the company, agreed to sell 15 per cent to Helios for N4.3 billion, thus reducing its shareholding to five per cent. Two other banks with five per cent shareholding each, and initial investment of N5 million agreed to sell everything to Helios for N1.1 billion. Investigations further revealed that all the banks sold part of their holdings in the company and as a result Helios ended up with 69 per cent majority shareholding in the company.

The banks, it was gathered saw the offer from Helios as opportunity to make good profit on their investment, and opportunity to boost their shareholders funds. But most importantly, one or two of the banks needed money to expand their business and hence saw the deal as opportunity to generate the required funds.

Established in 2004 and led by co-founding partners Tope Lawani and Babatunde Soyoye, Helios is one of the largest investment firms focusing on Africa and is among the few independent pan-African private equity investment firms being founded and managed by Africans.

Helios, it was gathered was willing to pay that much because of the premier position of Interswicth in the electronic payment market in Nigeria. The company owns the leanding payment card scheme in Nigeria, hence most of the electronic payment transactions in the country go through its debit card introduced in 2002 and issued by almost all the banks in the country. The company recently introduced the Verve card, a chip and pin debit card to replace the magnetic stripe debit card. The Verve card, which is currently issued by 21 out of the 24 banks in Nigeria, is the first and only chip and PIN card accepted across multiple payment channels including ATMs, Point of Sale (PoS) terminals, online, mobile and at banks, and enjoys the largest range of value added services.

Managing Partner and Co-founder of Helios, Babatunde Soyoye, described Interswitch as, “A Nigerian success story having been led by a superb, highly competent, innovative and entrepreneurial all-Nigerian management team”,  With the huge growth prospect for electronic payment in Nigeria, Interswitch, it is believed would continue to grow and hence become a major cash cow in the future. In addition is the regional expansion plan of the company which saw it acquiring two companies in two African countries.