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CAPITEC BANK HOLDINGS LIMITED - Investment In An International Online Lending Group

Release Date: 24/03/2017 15:35
Code(s): CPIP CPI     PDF:  
 
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Investment In An International Online Lending Group

Capitec Bank Holdings Limited
Incorporated in the Republic of South Africa
Registration number 1999/025903/06
Registered bank controlling company
Ordinary Share Code: CPI ISIN Number: ZAE000035861
Preference Share Code: CPIP ISIN Number: ZAE000083838
("Capitec")

INVESTMENT IN AN INTERNATIONAL ONLINE LENDING GROUP

Capitec has long expressed the desire to internationalise at
the right opportunity. Shareholders are herewith advised that
it has found a suitable international investment opportunity
in Cream Finance Holding Limited (“Creamfinance”), a globally
expanding online lending group.

Creamfinance 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. Its business model, sophisticated technology and
advanced credit scoring methods align the Creamfinance group
(Creamfinance and its subsidiaries) with Capitec’s business
model   and  supports   its  long   term   digital  strategy.
Creamfinance’s management team is innovative with a pragmatic
approach, cost conscious and focused on simplicity and
prioritisation of resources and capital, creating a cultural
fit with the approach followed by Capitec.

We believe that Creamfinance 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.

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

Creamfinance continuously investigates entry opportunities
into new markets and their online business model has been
developed in such a way that new countries can be entered
swiftly and efficiently, requiring limited investment in local
infrastructure.

Key features of the transaction

-   Capitec will acquire an interest of 40% in Creamfinance for
    €21 million;
-   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 Creamfinance. The balance of the shares in
    Creamfinance is held by Whirlon Investments Limited, Basic
    Group Limited and other small shareholders; and
-   Capitec will initially have the right to nominate one
    director on the board of Creamfinance. This position will
    be filled by André du Plessis, CFO of Capitec. 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.

Founders of Creamfinance

-   Matiss Ansviesulis, CEO of Creamfinance. He holds a BSc
    (Hons) in Business Studies from Lancaster University
    Management School (UK). He is the co-founder of Creditclub,
    the first P2P lending service in Latvia. He worked at JP
    Morgan, London in risk management and money market trading
    from 2009 to 2012; and
-   Davis Barons, Chairman of Creamfinance. He is a successful
    entrepreneur and founder of the Latvian and Czech non-bank
    lender associations.

Advantages of the transaction for Capitec

-   Develop experience in the management of a foreign business
    through a partnership approach;
-   Create a revenue source designated in a diverse pool of
    foreign currencies;
-   Access an income stream from a high growth industry that
    has potential for sustainable growth and internal capital
    generation; and
-   Gain   insight   into  a   technologically   advanced   and
    sophisticated   credit   scoring  model   and   information
    technology platform, supporting Capitec’s long term digital
    strategy.

The South African Reserve Bank has approved the Capitec
investment of up to 49% in Creamfinance as required in terms
of the Banks Act (Act 94 of 1990).

Capitec looks    forward   to   a   successful   partnership   with
Creamfinance.

24 March 2017
Stellenbosch
Sponsor: PSG Capital Proprietary Limited

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