Capitec is to acquire a stake in a European online lending group, marking its first entry into international markets.
The group is to purchase a 40% stake in digital finance company Creamfinance for €21 million.
Creamfinance, founded in Latvia in 2012, offers consumer loan products in countries such as Latvia, Poland, Georgia, the Czech Republic, Mexico and Denmark.
In a statement, Capitec said its sees synergies between its own long-term digital strategy and that of Creamfinance’s business model, technology and advanced credit scoring methods.
“It is an appropriate match. Creamfinance’s online business model has been developed in such a way that new countries can be entered swiftly and efficiently, requiring limited investment in local infrastructure. Capitec’s focus will be to provide strategic input and give access to skills in key areas such as information technology, credit management and the development of term loan products, thereby assisting Creamfinance to further grow its international business,” said Gerrie Fourie, chief executive of Capitec.
He added that the group’s foray into the high-growth consumer fintech industry, through Creamfinance, has the potential to offer sustainable growth and capital generation from a pool of foreign currencies.
While Capitec aims to gain experience in entering and operating in foreign countries, especially with respect to advancing credit in international and online environments, it will not be involved in the day-to-day running of Creamfinance.
Instead, it will provide “strategic input and give key access to skills in key areas such as information technology, credit management in general and the development of term loan products,” it said.
Capitec has said that the transaction will take place in three tranches at nine month intervals:
– The first tranche will see Capitec gain a 19.43% stake in Creamfinance for €6.7 million
– The second tranche, which will amount to €7.1 million, will increase Capitec’s stake to 31.25%
– The third tranche of €7.2 million will increase Capitec’s interest in Creamfinance to 40%
It said that each investment would be subject to a set of previously agreed upon performance measures being met.
In addition, existing shareholders will be given the option to sell a 9% of the shareholding in Creamfinance to Capitec at a cost of not more than €5.4 million, effectively increasing Capitec’s stake in the group to 49%.
According to Capitec, the South African Reserve Bank has approved an investment of up to 49% in Creamfinance by Capitec, in accordance with the Bank’s Act.
As part of the initial deal, Capitec chief financial officer André du Plessis will be nominated to serve as a director on the board of Creamfinance. Upon completion of the second investment tranche, Fourie will serve as Capitec’s second director on Creamfinance’s board.
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