Actis does second Egyptian FIG deal

The emerging markets investor has purchased a credit card processor as it seeks to consolidate the rapidly growing electronic payments market in Africa.

Actis has completed a management buy-in buyout  for Cairo-based electronic payments processor Mediterranean Smart Cards Company (MSCC). MSCC, which services North and Sub-Saharan Africa, now joins Commercial International Bank (CIB) as Actis’ second financial services investment in Egypt. It is the firm’s first investment in the payment processing sector.

[Africa is] the last continent that is so cash-dominated and 95 percent of the transactions are still cash-based, so we think there's huge potential for electronic processing.

Mark Richards

Financial details were not disclosed, though Mark Richards, head of financial services at Actis, confirmed it was an equity-only deal funded from the firm’s third emerging markets vehicle, which closed on $2.9 billion in December 2008.

The emerging markets firm believes the payment processing sector – which has long been a popular private equity target in developed markets – will experience rapid growth across Africa.

“This is just part of the payments revolution in Africa” Richards told PEO, “it’s the last continent that is so cash-dominated and 95 percent of the transactions are still cash-based, so we think there’s a huge potential for electronic processing”.
He also confirmed the company’s plans to use MSCC as a buy-and-build platform, noting there were “one or two payment processors around which we would certainly look at if an opportunity became available”.

MSCC was bought from global payments processor VISA and a consortium of eight Egyptian banks, which initially set it up in order for it to act as VISA’s card issuer in Egypt.

Actis is now the major shareholder, with MSCC’s management owning the rest. Paul Edwards, who joins MSCC as chairman, also owns a stake in the company. He is currently also chairman of Nigerian telecoms company Starcomms, which Actis exited in 2008.  Richards declined to reveal specific details about the size of each party’s stake.

Richards said the company has signed deals with credit card companies including MasterCard, American Express, Diners Club and China Union Pay to enable MSCC to become “the processor of choice for all card brands in Africa”.