African Rainbow Capital (ARC) is set to acquire, through ARC’s 50.1% held subsidiary, ARC Financial Holding Company (FinHoldCo), 90% of TymeDigital for an undisclosed sum. FinHoldCo will become the 100% owner of the entity.
The acquisition is subject to approval by the regulatory authorities, including that of the Prudential Authority of the South African Reserve Bank. The ARC Fund, an en commandite partnership in which ARC Investments is a limited partner, holds 49.9% of FinHoldCo.
TymeDigital is a registered South African bank with a strong fintech focus. It is majority owned by the Commonwealth Bank of Australia (CBA), a leading banking group in its core markets of Australia and New Zealand. FinHoldCo currently holds a 10% shareholding in TymeDigital.
It was reported late last month that CBA was looking at reeling in its investments in other markets to focus on Australia and New Zealand, with speculative reports floating around pointing to it selling off Tyme as part of that strategy.
ARC was pegged as the most likely buyer.
ARC Investments is a listed entity that is 51.7% owned by ARC, which in turn is 100% owned by Ubuntu-Botho Investments (UBI), a broad-based black economic empowerment entity.
UBI also owns a 13.5% shareholding in Sanlam, the diversified financial services group, which makes it the single largest shareholder in Sanlam.
The acquisition comprises TymeDigital in South Africa and the related intellectual property and patents. Following the finalisation of the acquisition, ARC may consider introducing new shareholders in the current structure, which may include management, it said in a statement on SENS, on Wednesday (8 August, 2018).
TymeDigital has been trialling its operations as it works towards an official launch.
It aims to provide affordable and accessible banking services through a growing network of partners, including Pick n Pay, its leading distribution partner with 750 Pick n Pay and Boxer stores.
Targeted client segments include unbanked and underserved clients as well as small and medium enterprises. Competitive technology allows the bank to on-board clients with greater ease relative to its competitors and keep bank charges more affordable than what SA banking clients pay in general.
According to CBA’s financial results for the 2018 financial year, TymeDigital posted a net loss of A$78 million for the period (R770 million), and its non current assets have been impaired by A$91 million (R900 million).
TymeDigital forms part of the group’s International Financial Services (IFS) division and is now treated as a discontinued operation within that division.
A significant portion of CBA’s write-offs have been attributed to TymeDigital – specifically an amount of A$55 million (R543 million), which has been linked to the bank’s launch in South Africa.
CBA said that the sale of TymeDigital is still subject to regulatory approval and potential sale price adjustments – and as a result, the financial effect of the sale currently cannot be reliably estimated – however it is not expected to have a material impact on the group’s results, it said.