Motsepe’s ARC joins consortium to seal R1.5bn fintech deal
A consortium led by Ethos’s Mid-Market Fund I (EMMF I) and including Patrice Motsepe-backed African Rainbow Capital (ARC) has swooped up fintech firm Crossfin, in a deal valued at R1.5 billion.
The transaction, one of the largest private equity-led investments in SA’s fintech sector, will see the exit of Crossfin founding investors, Capital Eye Investments and the Multiply Group, which have been anchor shareholders since 2017.
Investment banking firm Fairview Partners acted as financial advisor on the transaction.
Crossfin has a portfolio that processes over 134 million card and 20 million mobile-enabled payment transactions per annum, with an aggregated value of over R79 billion.
The company, which has three divisions − payment technologies, smart funding and venture capital − recently acquired EOH subsidiary Sybrin, as part of another consortium, for R410 million.
Sybrin is a low code and artificial intelligence (AI)-enabled enterprise software business targeting the financial sector, with a focus on automation and the use of AI and machine learning.
In a statement today, the EMMF I and ARC consortium, which includes the founding Crossfin executive management team and Ethos Artificial Intelligence Fund I, says the deal gives the group much-needed exposure in fintech, a sector that is ballooning due to digitalisation and snowballing payment technologies.
Deal terms for the transaction include the consortium also providing Crossfin with acquisition and growth capital to enable it to invest organically and pursue new opportunities across SA and the rest of Africa.
For Motsepe’s investment firm, ARC, the company will acquire 37.33% of Crossfin, via the consortium, for R600 million, which will assume a combination of acquisitive capital from the existing shareholders and growth capital for identified portfolio transactions.
ARC, which has investments in various sectors, including telecoms, says the transaction is aligned to its ambition to establish an ecosystem of fintech-related businesses.
Charmaine Padayachy, ARC deal executive, comments: “Crossfin has a capable management team in place that we are confident will continue to add significant value to what is already an impressive track record underpinned by quality and high-growth businesses. We are confident that Crossfin will play a key role in reshaping the financial services landscape and continue to innovate and pioneer as it has done in the past.”
“We believe this is an exciting opportunity underpinned by strong tailwinds in a cutting-edge industry. Crossfin is ideally positioned to continue capturing the payments technology and the broader fintech opportunity, both existing and emerging. The transaction is an exceptional opportunity to acquire a group with significant value creation momentum,” says Edward Pitsi, managing partner at EMMF I and deal lead.
Similarly, Dean Sparrow and Anton Gaylard, who lead Crossfin as CEO and CXO, respectively, say the deal will enable the company to pursue opportunities across Africa.
“With additional growth capital invested in the business, we are advancing our vision of building and investing in great fintech businesses, growing a compelling and mutually beneficial fintech ecosystem to enable growth and efficiencies for economies in Africa and beyond.
“As management, we see significant growth underpinned by secular tailwinds in the payments, smart funding and broader fintech industry, which has seen us effectively re-invest 100% of the proceeds from the sale of our stake back into the business.”
Roger Grobler, partner at Ethos Artificial Intelligence Fund I, comments: “Disruption and exponential growth come from using technology, data and algorithms to create new business models, particularly in financial services. Crossfin has a track record of doing exactly that, with significant future potential to be unlocked in the years to come.”