![[CAPTION] Flash is Pepkor’s fintech and digital services platform that enables access to financial and digital products. (Image supplied)](https://lh3.googleusercontent.com/TA2nBXbgYC0_MUqhwGXfL9LXkBxKC7QKYBMYNZvIF_a1gFNsybzidrM3TcqJMNGhDFv1tkmc_ZQ10yoj45sfGco3wLmdEa17-l-k)
Retail giant Pepkor has merged Flash, its wholly-owned fintech subsidiary, with Shop2Shop to create merchant commerce and fintech platform FintechCo, with annual throughput exceeding R200 billion.
Following implementation, Pepkor says it will hold a controlling interest of approximately 57.1% in FintechCo.
Under the transaction, Pepkor will acquire a controlling 57.1% interest in FintechCo through a combination of a R1.57 billion cash subscription for new shares in Shop2Shop and the contribution of its entire 100% shareholding in Flash, which has been valued at R10.6 billion.
According to Pepkor, the transaction implies a total equity valuation of approximately R21.3 billion and is expected to unlock meaningful strategic and operational synergies.
In its latest financial results published in May, Pepkor said it is rapidly expanding beyond its traditional discount retail roots, with its smartphone rental and fintech operations emerging as key growth drivers.
It added that the informal market platform segment, anchored by Flash, increased throughput by 20.3% to R34.7 billion.
Flash is Pepkor’s fintech and digital services platform that enables informal and underserved consumers to access financial and digital products through a network of retail stores and independent traders across South Africa.
Originally launched as a prepaid airtime and electricity vending business, Flash has evolved into one of the group’s fastest-growing fintech operations.
Flash ended the six months to 31 March with 176 000 active traders and 79 000 acquiring devices in the trader division, driving a 28% increase in tapped value.
Aggregation throughput grew by 59%, while voucher redemptions in the consumer division grew by 31% to 232 million.
In a statement today, Pepkor says together, Flash and Shop2Shop provide extended coverage of the informal market value chain, linking cash handling, acquiring, payments, value-added services (VAS) and related financial services.
According to Pepkor, South Africa’s informal market represents a fast-growing segment of the economy, underpinned by resilient consumer demand and increasing merchant participation.
It adds that Flash and Shop2Shop are complementary businesses. Shop2Shop’s extensive merchant and payment network with upstream capability combines with Flash’s downstream VAS and digital product set capability to create an integrated platform with greater scale, reach and relevance, it explains.
Peter Berry, founder and CEO of Shop2Shop, says: “Shop2Shop was founded to bring purpose-built solutions to South Africa’s large and underserved informal merchant market, to empower small business owners.
“We’ve built a broad product set on a platform engineered for high-volume, low-cost transactions. With Flash, we are able to deepen our offering and scale, and position a proven fintech platform in South Africa.”
The combination will diversify and strengthen Pepkor’s earnings within its Informal Market Platform segment, marking a significant step in its strategy to accelerate growth in this space, it notes.
In addition, it will create value unlock for shareholders through a planned future listing of FintechCo.
Garth Napier, chief commercial officer of Pepkor, adds: “This transaction is transformative for Pepkor and was the logical next step in expanding the group’s participation across the informal market value chain, while extending the reach of our financial services ecosystem and supporting our ambition to build a leading digital bank with a nationwide distribution footprint.”
The proposed transaction is subject to various conditions precedent, which include, but are not limited to, receiving all necessary regulatory and competition authority approvals.
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