NIH Planned Acquisition of DPO for $288 Million Will Transform Africa’s e-Commerce Experience
Expectations are rife that Africa’s mobile money payment industry will experience a bang with the proposed acquisition of DPO, Africa’s largest online commerce platform by Network International Holdings plc, the leading enabler of digital commerce across the Middle East and Africa. This comes as Network International Holdings announce that it has entered into an agreement to acquire DPO Group , the leading, high-growth online commerce platform in Africa, for a total consideration of approximately $288 million.
The consideration will be almost entirely funded through the proceeds from an equity placing representing 10.0% of the Company’s existing issued share capital, $50 million vendor consideration shares issued to Apis Growth Fund I, managed by Apis Partners $13 million consideration shares issued to the DPO co-founders, with any small remaining balance to be funded via existing debt facilities.
As Africa’s largest e-commerce firm by scale, DPO has experienceda rapid growth profile with revenue CAGR of c.40% from 2017-2019 and Total Processed Volume CAGR of c.30% from 2017-2019. Revenues of USD16 million in 2019. Also, it is the leading e-commerce and mobile money services for 47,000 merchants across high quality brands and had presence in 19 countries across Africa with South Africa, Kenya and Tanzania representing major markets. Multiple distribution channels with on the ground presence to recruit merchants, combined with direct connectivity to acquiring bankso. This acquisition among others things consolidates and accelerates NIH’s presence in Africa, the most underpenetrated and fast growing payments market in the world. Africa expected to represent c.40% of Network International total revenue by 2024 (27% in 2019), giving us an evenly balanced business in Africa across Merchant and Issuer Solutions.
Also, it brings direct merchant and Mobile Network Operator relationships, broadening their business in Africa across the entire payments value chain while widening their capabilities and exposure in fast growing online payments and mobile money, enabling merchants to accept a wide range of payments methods. It equally offers a combined incremental capabilities and solutions to provide significant cross-sell opportunities to both Network International and DPO customers. And the acquisition is expected to be broadly EPS neutral in 2022, including integration costs. Double digit ROCE within 3-4 years, and significantly higher thereafter.
With digital and online payments market in Africa expected to grow at 19% CAGR over the next five years and Covid-19 expected to accelerate this growth, this has been described as a very strategic acquisition by analysts. This is because e-commerce penetration in Africa is still 0.3% of private consumption, versus c.5% in the United Kingdom and c.17% in China, thus the room for growth cannot be over emphasised.
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Following stringent lockdowns in DPO’s main market of South Africa during April, DPO signed c.4,400 merchants in June 2020, an all-time high. TPV growth year-on-year was 27% in May (57% in constant FX) and 27% in June (49% in constant FX).
As part of the deal, DPO Co-Founders were also incentivised and aligned through rollover of $13 million of their DPO ownership into Network International shares and a two year holding period from the point of acquisition signing. And acquisition consideration to be almost entirely financed through proceeds from a 10% equity placing, $50 million vendor consideration shares issued to Apis (subject to a three month lock-up from the point of acquisition completion), and the Co-Founders Consideration Shares, with any small remaining balance funded by existing debt facilities. Completion of the Transaction is expected in Q4 2020, subject to customary closing conditions including regulatory and anti-trust.
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Commenting on the acquisition, the CEO of Network International Holdings Simon Haslam said that “we are excited by the proposed acquisition of DPO, the leading high-growth online commerce platform operating at scale across Africa. Africa is a vast and diverse continent, representing the world’s most underpenetrated, nascent and fast growing payments markets, where we have seen recent signs of an acceleration in those trends. DPO will further consolidate our presence in Africa, strengthen our position across the entire payments value chain and accelerate our growth. This acquisition will widen our capabilities across online, mobile and alternative payments; bring an extensive and diverse range of direct merchant relationships to our business; and provide a wider range of solutions for our existing customers. We look forward to bringing our two businesses together and welcoming DPO’s colleagues into our group. Together, we have a powerful combination to accelerate digital payments across our regions and deliver significant shareholder value.”
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry