Transaction Capital has announced that it had concluded a subscription deal to buy a 49.9percent stake in automotive retailer WeBuyCars for R1.84billion.
The group said that WeBuyCars would continue to operate as an independent business within its specialised market, adjacent to SA Taxi, with this investment establishing Transaction Capital’s third market vertical. It said the investment had no integration risk for it.
WeBuyCars is currently owned 60% by the family trusts of founders Faan and Dirk van der Walt, 31.5percent by Fledge Capital Proprietary, and 8.5percent by minority shareholders.
Transaction said it would pay R1.47bn in cash and R16467000 on newly issued ordinary shares at R20 per share for an aggregate value of R329.3million.
It said favourable trends amplified by COVID-19 were likely to accelerate growth in the used vehicle segment.
Chief executive David Hurwitz said: “This investment is an exceptional opportunity to own a significant interest in a trader of used vehicles in South Africa. The investment in WeBuyCars will be immediately value accretive, converting interest income on our undeployed capital into higher yielding operating earnings, accelerating Transaction Capital’s earnings growth rate. Options are in place, which if exercised and implemented, after regulatory approval, would result in Transaction Capital increasing its interest in WeBuyCars at a future date.”
The Competition Commission earlier this year prevented Naspers’s deal to buy WeBuyCars over fears that it could have led to a substantial reduction in competition in the car-buying market.
Transaction Capital said that WeBuyCars was uniquely positioned in its market segment, highly competitive and entrepreneurial founder-led business, with an impressive 20-year track record.
Hurwitz said he expected Transaction Capital to return to strong organic earnings and dividend growth above 2019 pre-COVID-19 levels for the 2021 financial year and beyond. Transaction Capital declined 0.38 percent on the JSE yesterday to close at R18.20.