Cape Town - Capitec Bank [JSE:CPI] clinched its first deal with a foreign fintech firm after looking abroad for digital banking breakthroughs. Here is a closer look at the deal.
Capitec will purchase a 40% stake in Creamfinance for €21m. The investment will be done in three tranches at nine-month intervals, subject to certain performance measures being met.
1. The first tranche for 19.43% in Creamfinance will be acquired for €6.7m, while the second investment of €7.1m will increase Capitec’s shareholding to 31.25%. The last tranche of €7.2m will bring Capitec’s stake to 40%.
2. Existing shareholders of Creamfinance have the option to sell a further 9% shareholding to Capitec at a maximum cost of €5.4m (the put option), which would increase Capitec’s interest to 49%. The put option can be exercised at the time of the second or third investment tranches, but remains subject to Creamfinance meeting the performance measures for the relevant tranches.
3. It is not the intention for Capitec to become a controlling shareholder.
4. The two founders will each maintain an interest of at least 10% in Creamfinance. The balance of the shares is held by Whirlon Investments Limited, Basic Group Limited and other small shareholders.
5. Capitec will initially have the right to nominate one director on the board of Creamfinance. This position will be held by André du Plessis, CFO of Capitec. This will be increased to two after the second investment tranche, which position will be filled by Capitec CEO Gerrie Fourie.
Fourie, who described the deal as an "appropriate match", said the new partnership provides Capitec with an opportunity to gain experience in entering and operating in foreign countries.
“We view the foreseeable future as a period to learn and gain experience in managing a remote business through a foreign partnership, while creating a new revenue stream in a diverse pool of foreign currencies and gaining insight into advanced technology and credit models that we may be able to use at home,” he said.
Creamfinance uses technology and advanced Smart Data credit scoring methods to provide online consumer loan products. The European digital, consumer finance company, has an international footprint in Latvia, Poland, Czech Republic, Georgia, Denmark and Mexico.
The share price of Capitec was down 0.43% at R804.25 at the close of markets on Friday in Johannesburg, after recovering from the day's low of R800.02.
Capitec expects profits for the year ended 28 February 2017 to be between 16% and 19% higher than the previous year. It expected its headline earnings per share to rise by between R32.33 and R33.17 a share from R27.87 a share in the prior year.
Capitec’s financial results will be published on 28 March.