U.S. private equity firms Warburg Pincus and General Atlantic have bought a 49 percent stake in United Arab Emirates-based payments processor Network International from The Abraaj Group, the companies announced in a statement.
The investment is a rare example of Western private equity capital being injected into the Middle East, with Warburg and General Atlantic attracted by the gradual transition from cash to electronic transactions in the Middle East and Africa.
Neither Warburg nor General Atlantic indicated how much they paid for their stake in the largest payment processor in the Middle East and Africa, which has a presence in more than 40 countries and is 51 percent owned by Dubai's largest bank, Emirates NBD.
Dubai-based Abraaj bought 49 percent of Network International for about $539 million in 2011, it said at the time, and Abraaj partner Mustafa Abdel-Wadood said that the sale has created "positive returns" for Abraaj's investors, without elaborating.
With around 80 percent of the company's revenues from the UAE, the private equity firms are keen to strengthen Network International's returns in other markets.
"Our investment approach is to bring the capital base and scale of a large global fund into the growth investing market, and we can provide Network International with significant firepower and support for an aggressive acquisition programme," Joseph Schull, managing director and head of Europe, Middle East and Africa at Warburg Pincus, told Reuters.
Network International’s shareholders could invest up to $350 million in a single acquisition, said sources familiar with the deal.
POTENTIAL TARGETS
The sources said that one of several companies being looked at is Emerging Markets Payments, the payment services firm owned by Actis, an investment company.
Warburg Pincus, General Atlantic and Actis declined to comment on Emerging Markets Payments.
Other payment processing-type businesses within the back offices of banks in the region are also potential targets, the sources added.
While many banks in the West have spun off such parts of their business, that trend has yet to emerge fully in the Middle East.
An initial public offering (IPO) of Network International in five to seven years is "certainly a possibility," Warburg Pincus's Schull said.
General Atlantic CEO Bill Ford said: "We all think Network International is a company of a quality and scale that can go public at the appropriate time down the road. We think that global investors will want an opportunity to invest in it because of its leadership in payments in the Middle East and Africa."
There has been strong interest in global payments processing in recent months, with Britain's Worldpay listing on the London Stock Exchange last month in an IPO that valued the company at 4.8 billion pounds ($7.4 billion).
Abraaj had considered a flotation of Network International this year.
“We felt an IPO was a good option, but in the end we found credible buyers paying fair value that ENBD and Network International were comfortable with as partners," Abraaj's Abdel-Wadood said.
Warburg Pincus and General Atlantic were advised by Perella Weinberg Partners, Morgan Stanley, and Citi, according to the statement. Moelis & Co advised Abraaj, Reuters previously reported.
