AirAsia buys 40% share in Tune Money

PETALING JAYA: AirAsia Bhd is buying a 40% stake in Tune Money Sdn Bhd for RM10 million or about 18.5 sen per share and plans to list the no-frills online financial service provider in five years.
AirAsia told the stock exchange yesterday that it had signed a shareholders' agreement with Tune Money International Sdn Bhd (TMI) and Tune Money to buy 54 million new 10 sen shares in the enlarged paid-up of Tune Money.
It also signed a commercial agreement and merchant agreement with Tune Money to sell and distribute prepaid card products developed by Tune Money to be targeted and marketed to, amongst others, the AirAsia customers.
Tune Money's founder is Tan Sri Tony Fernandes, the founder of the low cost airline, AirAsia. He and Tune Group's founder, Datuk Kamarudin Meranun are major shareholders with 19.95% and 19.16% stakes respectively.
"The acquisition of shares into Tune Money will position AirAsia to take full advantage of future growth in electronic money, projected to expand rapidly especially in emerging markets such as Asean," it said.
It said that Tune Money holds an e-money license from Bank Negara Malaysia that has become more difficult to secure due to recent regulatory tightening under the Financial Services Act 2013.
"As a business that relies heavily on online transactions, AirAsia would benefit from acquiring a stake in a company that holds such a license as this would allow AirAsia to direct future development to ensure suitable products and best terms for AirAsia.
"This will be important as AirAsia moves closer to its 'cashless cabin' vision, which promises to boost ancillary spend and reduce shrinkage," it told Bursa Malaysia yesterday.
AirAsia said by acquiring a stake in Tune Money, it would enjoy costs savings and improve margins for AirAsia as Tune Money is developing a proprietary closed-loop network that its prepaid cards will run on.
This, it said, would reduce the cost of card acceptance to AirAsia by reducing the Merchant Discount Rate (MDR) by bypassing traditional credit card processing networks, in which Tune Money acts as acquirer, network and processor for purchases made with Tune Money-issued cards within the AirAsia Group ecosystem.
The proceeds from the issuance of shares will be used by Tune Money to repay shareholders advances, finance the launch of the new products mentioned above and working capital.
"The shareholders (of Tune Money) will work towards an initial public offering and listing of the shares of Tune Money or such other liquidity event within five years," it said.
On the commercial agreement, it said this would allow AirAsia to sell and to distribute hybrid prepaid card, Multi-currency FX hybrid prepaid card and two-in-one loyalty and payment hybrid card developed by Tune Money.