Naspers now more focused business, say analysts

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The news on Tuesday that Naspers will make its biggest transaction to date in the fintech space has been received favourably, with analysts saying the deal is a reflection of the more focused business the company has become.

Analysts believe the acquisition of Turkish digital payments start-up Iyzico by Naspers-owned online payments processor PayU is aimed at tapping into untapped markets with growth potential and making it a key player in the digital payment space.

Petri Redelinghuys, founder of Herenya Capital Advisors, believes the Iyzico deal “fits in with their vision of becoming a truly global force in the tech space”.

“They seem to be making acquisitions aimed at getting exposure to fintech in emerging and largely unpenetrated markets. I think this fits with their current model of finding and backing companies with great potential, then giving those companies the resources they need to grow and thrive.”

Asked if the Iyzico transaction signifies a more aggressive approach by the multinational digital and media company into the digital payments space, Redelinghuys says: “Perhaps a more aggressive approach, but perhaps just a reflection of the more focused business that Naspers is becoming now that it has mostly unbundled all the businesses that no longer fit into its vision.”

Founded in 2013, Iyzico provides secure payments to over 300 marketplaces – with over 400 000 personal sellers of different sizes – as well as 30 000 online merchants which are using its checkout services.

On Tuesday, PayU said the deal will strengthen its position in Turkey and help to build an online bridge between Turkey and Central and Eastern Europe countries and Africa, to encourage more cross-border trade in local currencies in the region.

The sale remains subject to Turkish regulatory and competition authority approvals and closing is expected to occur in the coming months.

This is the third fintech business in the space of two years that Naspers has acquired as it pursues its vision for digital payments.

In May 2017, the group invested $99 million (R1.3 billion) in Kreditech and also provided convertible loan funding of EUR20 million (R315 million) to the German online lender. Following the investment, the group holds a 38% effective interest in Kreditech.

In November 2017, the group invested $100 million in global digital money-transfer service Remitly, acquiring a 23% stake.

Redelinghuys, however, does not believe the Iyzico transaction is huge, when compared to the scope of Naspers.

“Time will tell here, I guess. This acquisition was really small compared to the sheer size of Naspers, so I don’t think that we’ll see fireworks immediately. It will need time and resources to unlock its true potential, so let's give it that time and see what happens,” he says.

Another analyst, Peter Takaendesa, senior equity investment analyst at Cape Town-based Mergence Investment Managers, believes payments is one of the key verticals Naspers has identified for long-term investment.

“They have largely exited their key investments in e-tail in markets outside South Africa and sold two percentage points of their shareholding in Tencent last year to fund the focus on payments, food delivery and classifieds. It's a long-term investment and unlikely to be a boost to near-term profitability as they need to invest further to gain scale.”

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