Grindrod-Bidvest not a big-four rival

2014-07-06 15:00

A deal that is pending between Grindrod Financial Services (GFS) and Bidvest Bank will not create the basis of a banking group to rival the big four and Capitec.

It is likely that the new business would remain a niche operation.

Bidvest Bank, a subsidiary of Brian Joffe’s Bidvest Group, has put a proposal on the table to acquire GFS.

Grindrod has a small asset management business, deals with trade finance and forex, and also has the social grants payments business. Bidvest Bank is a retail bank that specialises in foreign exchange. It also has other interest rates and banking products.

“Bidvest has been interested in the Grindrod bank for a while now, so finally they are much closer on the price to be paid,” said Warren Jervis of Electus.

“[The deal] makes perfect sense because it allows Bidvest to bulk up their banking operations and Grindrod can also focus on what is their core asset mix and strategy.”

Grindrod has increased its scale recently, in part thanks to the welfare grants distribution tender that was controversially awarded to technology company Net1, with whom it has a partnership.

The distribution was previously done by Absa subsidiary AllPay and has been the subject of a long court case that culminated with the Constitutional Court declaring the awarding of the tender constitutionally invalid.

By December 31 2013, GFS had issued a total of 9.7?million SA Social Security Agency (Sassa) debit cards, which accounted for 30% of total ATM transaction volumes in the country.

Also by year-end 2013, GFS had made a profit of R92?million, a 42% increase on the previous year.

GFS services small to medium-sized companies, high-net-worth people, institutions such as fund managers and attorneys, as well as Grindrod group customers from its freight services, trading and shipping divisions.

Bidvest Bank, on the other hand, in its annual financial results ended June 30 2013, showed a profit for the year of about R260?million, down from R317?million the previous year.

According to Jervis, the combination of the banks will still be a niche operation, just with more scale.

The scale that Grindrod brings to the table is thanks in part to being the banking muscle behind Net1 after it was awarded the five-year R10?billion tender to distribute welfare grants to more than 15?million beneficiaries.

Sassa recently said it was starting a new tender process. However, in papers filed with the Constitutional Court, it said this would not interrupt the distribution of grants.

According to court papers, by May?26 2014, Sassa had appointed a tender bid specification committee and it would take about 11 months for the tender process to be completed. It may not be easy for Net1 to win the tender again.

Grindrod said the deal had nothing to do with what was happening with Net1.

When asked about the pending deal between Grindrod and Bidvest, Net1 spokesperson Dhruv Chopra said it could not respond because the company was in a closed period.

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