Wasoko and MaxAB Merger Faces Delays Amid Due Diligence and Economic Challenges

The highly anticipated “merger of equals” between Kenya-based Wasoko and Egypt-based MaxAB has hit a delay, attributed to extend due diligence, ongoing restructuring, and various macroeconomic challenges. This merger, set to be the largest in African eCommerce with a backing of $240 million, has been in the works for seven months.

Merger Details and Current Status

Despite the delays, reports indicate that the merger is proceeding as planned. A crucial part of the deal involves a review of ownership stakes, initially set at 55% for Wasoko and 45% for MaxAB based on revenues at the end of 2023. However, the recent devaluation of the Egyptian pound could affect these terms, with MaxAB keen to finalize the deal due to its severely depleted runway.

Background and Strategic Moves

The preliminary merger agreement, reached in December 2023, aims to expand trade within Africa and deploy new technologies across both companies. Despite their significant funding and market presence, both eCommerce giants announced plans in January 2024 to cut their workforce by roughly 10%.

In a bid to streamline operations, Wasoko shut down its activities in Zanzibar, Tanzania, and halted operations in Uganda and Zambia in March. Although it denied exiting Rwanda in April, these moves reflect the strategic adjustments being made amid the merger process.

Investor Confidence and Economic Impact

The ongoing delays have impacted investor confidence. VNV Global, a Swedish investment firm, recently slashed its investment value in Wasoko by 48%, reducing its fair value to approximately $260 million. This significant reduction underscores the financial pressures and uncertainties surrounding the merger.

Future Leadership Structure

Upon completion of the merger, leadership roles will be divided to leverage the strengths of both companies. Wasoko CEO Daniel Yu will take charge of investor relations, human resources, and fundraising. Meanwhile, MaxAB CEO Belal El-Megharbel will oversee internal matters, including technology and operations. This division of responsibilities is designed to optimize the merged entity’s efficiency and effectiveness.

Outlook and Challenges

The merger between Wasoko and MaxAB represents a significant step towards consolidating the African eCommerce market. However, the extended due diligence process, ongoing restructuring, and macroeconomic challenges highlight the complexities involved in merging two large entities. As both companies navigate these hurdles, the successful completion of the merger could pave the way for enhanced market reach and technological advancements in African eCommerce.

While the delays pose short-term challenges, the long-term potential of this merger remains promising. The combined expertise and resources of Wasoko and MaxAB could drive significant growth and innovation in the region’s eCommerce sector, ultimately benefiting businesses and consumers across Africa.

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