JSE-listed financial services group Ecsponent has concluded an agreement in respect of its investment in Luxemburg-based and Frankfurt Stock Exchange-listed fintech innovator, MyBucks.
The company says the investment in MyBucks forms part of its portfolio of investments in its Equity Holdings business unit.
This portfolio comprises diversified investments representing assets in high-growth areas, says Ecsponent.
The Luxemburg-based MyBucks delivers financial services and products via financial technology, enterprise architecture, client management systems and artificial intelligence.
Through its brands - GetBucks, GetSure, New Finance Bank and Fair Go Finance - MyBucks offers impact loans, unsecured credit, banking solutions and insurance products to predominantly high-growth emerging markets.
Nonetheless, Ecsponent is yet to make any investments in the South African fintech sector. "If the right opportunities come along, meeting our criteria and being a good fit for our investment requirements, we will always be open to discussion," Ecsponent CEO Terence Gregory told ITWeb via e-mail.
According to Ecsponent, MyBucks is a perfect fit in respect of the group's target profile as the internationally-listed company offers a high technology, high profit margin business, while providing significant barriers to entry.
"MyBucks is based in Luxembourg but listed on the Frankfurt Stock Exchange, which is fast becoming a world-leading fintech hub," says Gregory.
"The city is home to the headquarters of most of the largest banks in the world and hosts more than 300 banks. Due to this concentration of financial institutions, the fintech industry can leverage Germany's economic strengths in the tech industry and the city's position as the European Union's financial centre."
He notes that most of the banks and financial institutions present in Frankfurt have launched programmes purposely customised towards the needs of the fintech and insurtech industries.
"In addition, the city has implemented a large pool of accelerator programmes to nurture the region's most promising ventures in these areas," says Gregory.
He adds that a report by Startup Genome, a group working to improve success rates among start-ups, made the following point: "Frankfurt has the highest concentration (tied with another ecosystem) of start-ups in a given sub-sector globally across the nearly 100 ecosystems we studied. In addition, more than 50% of local venture capital investment went into its fintech start-ups between 2012 and 2017."
The Ecsponent group currently holds 38.94% of the issued share capital in MyBucks. The agreement with the Claymore Private Foundation, a consortium of private investors, determines that Claymore will have a call option until 31 December 2023 to purchase all MyBucks securities held by the Ecsponent group.
The agreed strike price will be at EUR14 until 31 December 2019 and increase by one euro each year until 2023 when the strike price will be EUR18.
Should Claymore choose not to exercise this call option before 31 December 2023, Ecsponent may exercise its put option, at a strike price of EUR18 to acquire all MyBucks securities held by Claymore, providing it with a controlling stake in the company.
"The MyBucks group holds various banking licences, the intellectual property rights on bespoke artificial intelligence developments and scalable credit scoring systems. Depending on market developments and consumer requirements, there could be value in developing these assets in future," Gregory adds.
"The put option will give us the ability to acquire the majority shareholding in MyBucks, enabling the Ecsponent group to influence how these assets are commercialised in future. The timing of our option is such that the business would have reached maturity, resulting in a positive impact on the group's balance sheet."
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