After a collapse in the valuations for major tech startups, Prosus NV has canceled a $4.7 billion deal to buy Indian payments firm BillDesk.
Prosus said in a statement on Monday that the deal, scheduled to be the largest acquisition by Prosus, was canceled after certain conditions precedent weren't met by the end of September. The conditions were not elaborated on by the company.
FNB portfolio manager Wayne McCurrie said when Prosus struck the deal prices for technology companies were very different. With it falling through, it means that they won't be buying an overvalued asset and can conserve cash. Two people familiar with the matter said BillDesk will pursue all options to keep the deal alive, but they said BillDesk will not be named talking about sensitive information.
Representatives for BillDesk didn't respond immediately to a request for comment. A spokesman for Prosus didn't say anything beyond the company statement.
Prosus has invested close to $6 billion in Indian technology companies since 2005. BillDesk's deal will help increase the scale of its other businesses, including payments, that are dwarfed by the value of its stake in Chinese gamemaker Tencent.
The Competition Commission of India approved the BillDesk deal in September. A second and final regulatory clearance from India's financial regulators, the Reserve Bank of India, was needed for the deal to be completed. One person said an application with the central bank was submitted.
7 billion dollars are expected to be made by this year.
BillDesk, founded by three consultants at Arthur Andersen LLP more than two decades ago, has benefited from a surge in digital payments as Indians adopted smartphones and Internet access. The founders were to collect $500 million each from the deal, according to Bloomberg News.
After an increase in regulatory pressures, inflation and a concern that the global economy will go into a recession, technology firms and stocks have suffered a lot of sell-off and devaluations since the deal was announced in August last year.
The Dutch ecommerce investor has been selling stakes in its holdings in Chinese Internet giants Tencent Holdings Ltd. and JD.com Inc. to help fund a share buyback.
Many valuations have declined since the deal was announced, and Prosus has broad scale and financial firepower means it can afford to wait, according to John Davies, Bloomberg Intelligence analyst. He pointed out that the move to a more conservative investment strategy was announced in June, along with its Tencent selldown.
Prosus said its full-year operating loss narrowed to $859 million in the year through March from more than $1 billion, though core headline earnings per share for the period Prosus preferred measure of analyzing its finances declined.
Prosus shares fell by 0.8% at 11: 39 a.m. in Amsterdam trading on Monday. The stock has declined by 27% this year.
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