Capitec invests in international online lender

Capitec says the Cream Finance deal will support the bank's long-term digital strategy.
Capitec says the Cream Finance deal will support the bank's long-term digital strategy.

Capitec is acquiring a 40% stake in international online lending group Cream Finance for EUR21 million (R282 million).

The SA-based bank made the announcement via the JSE's Stock Exchange News Service and says it has "long expressed the desire to internationalise at the right opportunity" ? which it is now doing through the investment in a globally expanding online lending group.

Cream Finance is registered in Cyprus and the group provides online consumer loan products in a number of countries, including Poland, Latvia, Georgia, the Czech Republic, Mexico and Denmark.

Capitec says Cream Finance's business model, sophisticated technology and advanced credit scoring methods align it with the bank's business model and supports its long-term digital strategy.

"We believe Cream Finance will provide Capitec's management with the opportunity to gain experience in entering and operating in foreign countries, more specifically advancing credit in the international and online environment and to work with a foreign partner to manage an international business," the bank says in a statement.

Investment tranches

The investment will be done in three tranches at nine-month intervals and is subject to specific agreed performance measures being met. The first tranche of EUR6.7 million (R90 million) will give Capitec an interest of 19.43% in Cream Finance. The second tranche will increase Capitec's shareholding to 31.25% and will amount to EUR7.1 million (R95 million). The third tranche of EUR7.2 million (R97 million) will increase Capitec's shareholding to 40%.

Existing Cream Finance shareholders also have the option to sell a further 9% shareholding to Capitec at a maximum cost of EUR5.4 million (R72 million), which would then increase Capitec's interest to 49%.

Capitec, however, says it is not intending to become a controlling shareholder. The South African Reserve Bank has approved the Capitec investment of up to 49% in Cream Finance as required in terms of the Banks Act.

The bank believes the deal will allow it to create a revenue source designated in a diverse pool of foreign currencies and will also give it access to an income stream from a high growth industry that has potential for sustainable growth and internal capital generation.

Capitec will not be involved in the day to day operation of Cream Finance, but will focus on providing strategic input and give access to skills in key areas such as IT, credit management in general and the development of term loan products.

The two Cream Finance founders ? Matiss Ansviesulis and Davis Barons ? will each maintain an interest of at least 10%. The balance of the shares are held by Whirlon Investments, Basic Group and other small shareholders.

Capitec will initially have the right to nominate one director on the board of Cream Finance. This position will be filled by Capitec CFO Andr'e du Plessis, and after the second tranche investment, Capitec CEO Gerrie Fourie will also join the board as a director.

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