TPG acquires 7.5% of Airtel Africa’s mobile money business

U.S.-based private equity firm TPG announced on Thursday that it has acquired a 7.5 percent stake in Airtel Africa’s mobile money business for a sum of $200 million, the telco said in a statement.

Airtel Africa, the African arm of India’s Bharti Airtel, is also currently holding further negotiations with other companies to sell off minority shares in the company totaling 25 percent, as the provider looks to go public with the mobile money unit in the next four years.

On the chance of not heading toward an initial public offering (IPO) within the set time, the first close of the two-stage deal in, or changes of control without TPG’s prior approval, the private equity firm will have the option to sell its stake at a maximum of $400 million, Airtel Africa said in a statement.

“The Rise Fund, the global impact investing platform of leading alternative investment firm TPG, will invest $200 million in Airtel Mobile Commerce BV (“AMC BV”), a wholly owned subsidiary of Airtel Africa plc,” the company said.

Airtel Mobile Commerce BV 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 Airtel Africa’s 14 operating countries.

Users of the service can pay bills, shop, transfer money, deposit or withdraw funds via their linked bank accounts on the platform and represent around 17 percent of the company’s total customer base in the continent.

According to TPG, Airtel Africa’s mobile money service is valued at $2.65 billion on a cash and debt free basis. The deal will close on two stages, the first being a $150 million pay out once the transfer of sufficient mobile money operations and contracts into AMC BV has been completed, with $50 million to be invested upon further transfers.

“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,” the company said.

The telco highlighted that the proceeds of the deal will be used to reduce Group debt and invest in network and sales infrastructure in the respective operating countries.

“In line with our vision of enhancing financial inclusion, Airtel Africa offers a unique digital mobile financial services platform under the Airtel Money brand. With today’s announcement 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,” Raghunath Mandava, CEO of Airtel Africa, commented.

Following the deal’s completion, Airtel Africa will remain as the majority stakeholder in the business. “Our markets afford the substantial market potential for mobile money services to meet the needs of the tens of millions of customers in Africa who have little or no access to banking and financial services, and this demand is driving growth,” Mandava added.

It is worth mentioning that almost last year, TPG had invested $600 million in Bharti Airtel’s Indian rival, Reliance Jio; while the deal is considered an eyebrow raiser, it is important to note that both investments target different markets and are from separate funds within TPG.