South African fastest growing lenders, Capitec Bank is acquiring a 40% stake in Cream Finance, a lendtech platform, for $22 million (R282 million).
Cream Finance provides online loans in several European countries including Poland, Latvia, Georgia, the Czech Republic, Mexico and Denmark. Capitec have indicated that their investment will give them exposure and experience in operating in European markets.
The South African bank has indicated that they won’t be involved in the daily operation of Cream Finance.
The bank in a statement said, “We believe Cream Finance will provide Capitec bank’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,” said in a statement.
Some of the key features of the acquisition as highlighted by Capitec are:
- The investment will be done in three tranches at nine month intervals, subject to specific agreed performance measures being met. The first tranche of €6.7 million will give Capitec an interest of 19.43% in Creamfinance. The second tranche will increase Capitec’s shareholding to 31.25% and will amount to €7.1 million. The third tranche of €7.2 million will increase Capitec’s shareholding to 40%;
- Existing shareholders of Creamfinance have the option to sell a further 9% shareholding in Creamfinance to Capitec at an maximum cost of €5.4 million(“the put option”), which would increase Capitec’s interest to 49%. The put option can be exercised at the time of the 2nd or 3rd investment tranches, but remains subject to Creamfinance meeting the investment criteria for the relevant tranches;
- It is not the intention for Capitec to become a controlling shareholder;
- The two founders will each maintain an interest of at least 10.0% in Cream finance. The balance of the shares in Creamfinance is held by Whirlon Investments Limited, Basic Group Limited and other small shareholders; and
Capitec bank will initially have the right to nominate one director on the board of Creamfinance which will be filled by André du Plessis, CFO of Capitec.
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The second tranche will entitle Capitec to nominate a second director to serve on the board which will be filled by Gerrie Fourie, CEO of Capitec.