Brookfield Business Partners, the private equity arm of Canada’s Brookfield Asset Management, has signed an agreement to acquire UAE-based payments-processing company Network International for £2.2 billion ($2.76 billion), as part of its Middle East expansion.
The company’s offer price of 400 pence per share represents a premium of 64 per cent to Network International’s closing price of 243.6 pence on April 12, the last business day before the start of the offer period, Brookfield said in a statement to the London Stock Exchange on Friday.
“The strength of Network's people and technology platform has enabled it to build on its position as a leading payment solution provider across the Middle East and Africa,” said Ron Kalifa, chairman of Network International.
“The enlarged group will be well positioned to serve its customers and partners and support the acceleration of digital payments in the markets it serves.”
Network International previously received a takeover bid from a consortium of private equity firms CVC Capital and Francisco Partners, valuing the company at about £2.1 billion.
In April, Brookfield made an initial offer of 400 pence per share for the Dubai-based company, topping the consortium’s proposal of 387 pence per share.
Network International's shares were up 5 per cent at 383.40 pence on the LSE at 12.36pm UAE time. The company's stock has gained more than 25 per cent since the beginning of the year.
Network International reported a 42 per cent increase in 2022 net profit on revenue growth backed by increased consumer spending.
Revenue during the year rose more than 24 per cent to $438.4 million led by a "stellar performance" in its merchant services business, which grew its revenue by more than 41 per cent annually driven by UAE consumer spending.
Saudi Arabia and the UAE, the Arab world's largest economies, expanded at their fastest pace in more than a decade last year on the back of higher oil prices and government initiatives that boosted the recovery from the Covid-19 pandemic.
Brookfield said the funding for the deal would come from a combination of equity investments, with the private equity firm investing about $150 million as part of the overall financing.
The balance of the equity investment will be funded by Brookfield institutional partners First Abu Dhabi Bank, Mubadala, ADQ, and Olayan.
In a filing to the Abu Dhabi Securities Exchange on Friday, the UAE's biggest lender said it had entered into an agreement with Brookfield and other investors for the equity funding.
Brookfield, which took a 60 per cent stake in FAB's payments business Magnati last year, said there was "strategic and industrial logic" in combining Magnati and Network International.
"This combination would potentially create a key platform in the attractive MEA [Middle East and Africa] payments space at scale, best positioned to provide a full suite of offerings, further strengthen unit economics and deliver significant synergy opportunities, while creating avenues of sustainable growth," Brookfield said.
Demand for digital payments has soared after the coronavirus pandemic as more people use online banking services to transfer money and pay for e-commerce transactions.
Globally, digital payments are expected to grow to $8.26 trillion by 2024, from $4.4 trillion in 2020, according to Statista.
This year, total transaction value in the digital payments segment is estimated to reach $28.74 billion in the UAE and $106.30 billion in the GCC, the data portal has said.
"We have followed the company for some time and share the team's vision to build on that strong position by growing its offering to clients,” said Anuj Ranjan, president of Brookfield's Private Equity Group.
“With a long history of partnerships across the Middle East, Brookfield is a strategic partner with the track record of owning and operating mission-critical businesses,” Mr Ranjan said.
Brookfield Asset Management, which is based in Toronto, has assets worth more than $825 billion under management globally.
“The board has carefully considered the Brookfield offer in the context of the long-term growth prospects and opportunities available to the business, balanced against the current challenges and uncertainty in the global macroeconomic environment,” Mr Kalifa said.
“The Brookfield offer represents an opportunity for Network shareholders to crystallise, in cash, the value of their investments at a significant premium."