Kenyan e-commerce startup, Wasoko, has completed an all-stock transaction with Egyptian e-commerce firm MaxAB thus paving the way for the much-anticipated merger between the two startups.
- According to Tech Crunch, the two merged companies are working on a unified brand name which they did not reveal to the media and are expected to tap into fintech to diversify their operations and ramp up revenue margins.
- Last year in December, the two startups entered into merger negotiations after both of them scaled down operations and laid off staff due to financial challenges.
- The merged entity is likely to continue its operations within Egypt, Kenya, Morocco, Rwanda, and Tanzania – countries where they both had an impressively huge customer base and millions of dollars in market value.
“In line with the shift in focus on what’s important or not, we’ll decline to state specific GMV; however, what I will emphasize is that we are now making a net contribution margin or net profit per order, which wasn’t the case in the back in the day in the GMV maximizing period,” said Wasoko’s CEO, Daniel Yu.
The merger will incorporate 16 subsidiaries and due to the scale of the two companies, delays in the process were imminent. The CEOs of Wasoko and MaxAB, Daniel Yu and Belal El-Megharbel respectively, will serve as co-CEOs in the combined firm.
The board of directors will incorporate the co-CEOs and other investors such as Silver Lake and Tiger Global. Based on the merger agreement, both MaxAB and Wasoko reportedly have equal stakes in the company – refuting speculations that MaxAB had a controlling stock.
“It’s absolutely a merger of equals. The commercial terms we agreed on reflect that, as the cap tables and shareholder base were merged nearly 50/50,” Daniel Yu said.
Both companies provided e-payments, credit financing, and digital services top-ups for its merchants. In the merged entity, businesses will manage these services, but the merged company will provide them an integrated app alongside their main commerce services.
The merged company will have 450,000 merchants on its block, serving about 65 million customers in the continent. The Egyptian market is slated to be the largest market for these financial services that the combined company will intend to maximize revenues from, by December this year.
Last year alone, these services enabled MaxAB to earn US$180 million surpassing the e-commerce unit. The merged company has also set aside over US$20 million in merchant financing, launched within the past year, with a repayment rate of over 99%.
“To unlock the full potential of the African markets, we will require more of this kind of hyper-local startups coming together. We tried to do it alone in Senegal and Cote d’Ivoire back in 2022 and ultimately shut that down in 2023 not because the customer opportunity or pain point wasn’t there, but because the operations that are required to build out both businesses properly require that deep local expertise and experience, and we realized we were lacking at the time,” Yu concluded.
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