Global private equity company Actis has scooped up a majority stake in local payment solution firm Paycorp Holdings, buying it from listed Transaction Capital for R937 million.
Paycorp expects the transaction to open many doors for expansion in emerging markets and give it a solid balance sheet to fund acquisitions and product rollouts.
The deal follows Visa's mid-2011 investment of $110 million in Cape Town-based payment solutions company Fundamo, in a bid to lead the mobile money race, and is set to concentrate global eyes on SA's technology capabilities and innovation.
Actis is a private equity firm that invests mostly in Africa, China, India, Latin America, South and South-East Asia. Actis will become Paycorp's majority shareholder with a 77% stake, while founder and CEO Steven Kark and his executive team will become co-investors.
Paycorp owns and operates off-site ATMs, prepaid debit cards and EFT terminals. It owns its own third-party transaction switch, is a Visa-certified provider of stored value prepaid card solutions, and deploys debit and credit card terminals.
The deal also includes Paycorp units ATM Solutions, DrawCard and EFTPOS. ATM Solutions owns and operates almost 5 000 ATMs across southern Africa, while DrawCard deploys Visa-certified card programmes, and EFTPOS provides merchant debit and credit card acceptance solutions.
Pipeline of plans
Kark says Paycorp, which started out as ATM Solutions and grew into all three payment spheres, has been aggressive in the mobile point of sale space and, with Actis' backing, it may look to more acquisitions. He adds its core executive team will remain unchanged.
"Actis's investment in Paycorp is a strategic development that will give us valuable alliances with other global payment players. We see great potential to leverage insights and expertise from other emerging markets and extend our footprint even further afield."
Paycorp has technical competence, know-how and IT that Kark believes is relevant for the rest of the world, especially emerging markets. He hopes to use Actis' emerging market reach to internationalise the company, and points out that Actis is believed to be the largest private equity fund in emerging markets.
Kark says that, as Paycorp has been in the game for 13-and-a-half years, it has good intellectual property, technology and operations. The first step will be to bed down the deal and then start dealing with a pipeline of "interesting opportunities" on the backburner that need to be fine-tuned, he adds.
Good opportunity
SA can hold its head high relative to other big international payment companies, says Kark. Paycorp has been a wholly-owned subsidiary of Transaction Capital since 2006, which is headed by Mark Lamberti.
Actis's investment in Paycorp is a strategic development that will provide valuable alliances with other global payment players, says Paycorp founder and CEO Steven Kark.
Kark, a co-founder of Transaction Capital, said he was grateful for the group's part in Paycorp's development. "Being part of Transaction Capital and working closely with Mark Lamberti has enhanced Paycorp's strategic focus, leadership development and corporate governance.
"We're equally appreciative of Mark's recognition that Actis can unlock further value for Paycorp."
In a notice to shareholders, Transaction Capital explains it has consistently held the view that it is obliged to consider disposing a subsidiary if its prospects and performance may be enhanced by another owner. It notes that synergies between Paycorp and its other units have been "elusive".
Transaction Capital is a non-deposit-taking financial services group active in asset-backed lending, unsecured lending, credit services and payment services. It owns SA Taxi, Rand Trust, Bayport, MBD Credit Solutions, Principa (previously PIC Solutions) and Paycorp Holdings.
Actis wants to buy Paycorp to supplement its current investment portfolio, says Transaction Capital's announcement. "For Actis, the acquisition of the Paycorp Group is an attractive investment opportunity, which is anticipated to achieve good returns for its investors in future."
The deal fits in with Actis's investment thesis of rising consumer demand for quality services and the build out of social infrastructure, says the announcement. It also fits with its financial services strategy and has similar current investments such as AGS, the Indian independent ATM deployment player; and EMPH, the Africa and Middle East payment processing business.
Actis's investment in Paycorp will be its fifth in the payments industry in three years.
Natalie Kolbe, a partner in Actis' Johannesburg office, says Actis looks "forward to a mutually-beneficial partnership with Paycorp in building a stronger global payments presence". The transaction is subject to certain conditions being fulfilled over the next few weeks and implementation should be complete by the end of 2013.
Top of the class
World Wide Worx MD Arthur Goldstuck says the offer highlights the extent to which SA is a world-leader in payment systems. He says Paycorp has the ability to integrate different payment systems across retail, ATM, banking and merchant payment systems.
There are vast skills in that area in SA, which is "way ahead" of the US, says Goldstuck. He notes this was the reason that Visa bought Fundamo in the middle of 2011.
Goldstuck says the offer should sharpen the focus on SA's technology skills, which is already a big focus area. He points out that Africa, especially in mobile payments, leads the world in innovation, and SA has the strongest base of technology skills on the continent.
Share