Corporate deals
OLX Group becomes largest shareholder in Cars45’s parent company, FCG
Berlin-based startup, Frontier Car Group (FCG) has secured $400 million from OLX Group.
Berlin-based startup, Frontier Car Group (FCG) has secured $400 million investment from OLX Group. The capital infusion is expected to accelerate the growth of FCG into the top five car marketplaces worldwide and make it number one in some African markets. Its subsidiary, Cars45 is currently operating in a nascent market in Nigeria.
Nairametrics was informed that the $400 million would be disbursed into the expansion of FCG’s footprint among emerging markets. This isn’t connected to the operation of Cars45 – which also raised $5 million in 2017 and will seek more investment as the quest for growth increases, according to Cars45 founder and CEO, Etop Ikpe in an interview with Nairametrics.
This isn’t OLX’s first FCG investment: The $400 million fund isn’t the first capital FCG will be receiving from OLX Group. The startup had received $89 million from OLX Group in 2018. This helped in the acquisition of WeBuyAnyCar in the United States.
CEO of FCG, Sujay Tyle
What this means: The $400 million capital makes OLX Group the largest shareholder in FCG as it is an exchange for new shares and to buy out existing shareholders in FCG.
It also boosts the value of FCG which reported impressive revenue placed at $700 million in 12 months. Since OLX took up stake in FCG, the used-cars marketplace venture has increased its presence from four to ten markets including Nigeria, United States, Argentina, Poland, India, Chile, Pakistan, Indonesia, Colombia and Mexico.
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A partnership that works: While speaking about the impact of OLX Group on the operation of FCG, the co-founder and CEO of the group, Sujay Tyle said since OLX began to invest in the startup, the growth of FCG has been on an upward swing
“Together with OLX Group and Prosus, we are aiming to revolutionize the used car market in several emerging and developed economies by adding trust, transparency and a comprehensive suite of services to all participants in the ecosystem.”
He added that, “This is a testament to FCG’s team, the ripe market opportunity, and the results of early integration with OLX in our key markets.”
Also speaking about the deal, Martin Scheepbouwer, CEO of OLX Group, said, “Together with FCG, we are aiming to build the leading global used car marketplace, offering a premium and convenient service to millions of car buyers, sellers and dealers. We’re in a unique position to accelerate the expansion of this platform worldwide.
“Our experience in India is a great proof of concept, where within the space of a year, our joint venture has already increased the number of stores threefold, with car purchase volumes continuing to grow by 10% month-on-month.”
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What you need to know: OLX Group is part of classified units of Prosus, the European company owned by South African firm, Naspers.
Corporate deals
Access Bank acquires Zambian Cavmont Bank Ltd
The statement from Access Bank says that the deal is a highly complementary transaction.
Access Bank Zambia, a subsidiary of Nigeria’s Access Bank Plc, has reached a ‘definitive agreement’ with Cavmont Capital Holdings Zambia Plc (CCHZ) to acquire Cavmont Bank Ltd.
The tier-1 bank announced this latest development regarding the merger talk which has been ongoing for a while, in a statement that was signed by its Company Secretary (Sunday Ekwochi) and issued to the Nigerian Stock Exchange earlier today.
According to the statement by Access Bank, the deal is a highly complementary transaction that is expected to combine Access Bank Zambia’s wholesale and trade finance capabilities with Cavmont Bank’s retail and commercial banking operations.
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The proposed transaction which, in the meantime is still subject to relevant shareholder and regulatory approvals, is also expected to better position Access Bank Zambia as one of the top 10 banks in the Southern African country.
Customers from the enlarged bank will benefit from greater security offered by what will be one of the most capitalized banks in Zambia with a more diversified product and service offering and a broader geographical footprint and infrastructure.
Access Bank on its notification stated, ‘’Subsequent to our announcement on July 8, 2020, the Board of Access Bank Plc announces today that its subsidiary, Access Bank (Zambia) Limited, has entered into a definitive agreement with Cavmont Capital Holdings Zambia Plc (CCHZ) regarding proposed acquisition of Cavmont Bank Limited, a subsidiary of CCHZ and subsequent merger of Cavmont Bank’s operations into Access Bank Zambia. The proposed transaction, which remains subject to relevant shareholder and regulatory approvals, will position the enlarged Access Bank Zambia as one of the top 10 banks in Zambia and create the momentum to advance its strategic objectives.’’
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‘’Under the terms of the agreement, Access Bank Zambia will acquire the entire issued ordinary share capital, assets and liabilities of Cavmont Bank while Capricom Group Limited, the ultimate majority shareholder of CCHZ will invest at least ZMW300 million ($16.5 million) of preference shares into Access Bank Zambia. Capricorn will hold preference shares in the enlarged Access Bank Zambia for a period of five years, after which the preference shares will be acquired by Access Bank Plc.’’
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The statement also notes that the enlarged bank will be well placed to participate in the long-term economic growth of Zambia and will be predicated on the country’s vast reserves of natural resources and fast growing young population.
The transaction is expected to be completed during the fourth quarter of 2020.
Corporate deals
DEAL: Custodian Investment agrees to buy majority stake in UPDC
Custodian Investment announced on Monday to acquire a 51% stake in UPDC, a real estate company owned by UACN.
Custodian Investment announced on Monday to acquire a 51% stake in UPDC, a real estate company owned by UACN. This is confirmed in a press release posted on the website of the Nigerian Stock Exchange.
UACN announced plans to spin off its investment in UPDC in 2019 after multiple years of losses and value accretion threatening to undermine the going concern status of the parent. Last June, UPDC announced it has raised N16 billion from the right issue as it prepared for its unbundling.
In separate press releases between Custodian and UACN, the duo agreed to a sale of 51% or 9, 465, 584, 668 ordinary shares of UPDC in a transaction that will occur in two phases.
Deal Details
- An initial sale of 5.1% of UPDC will be sold to Custodian Investment
- The second sale of 45.9% of UPDC will then be sold to Custodian Investment
- The companies did not reveal timelines for the consummation of the deal
- Due to this deal, UACN will stop its unbundling plans for UPDC
- The deal is subject to regulatory approvals.
- The purchase consideration was yet to be disclosed, however, UPDC has a market capitalization of N15 billion while Custodian has a Market Capitalization of N30 billion as at press time.
What they are saying
The CEO of Custodian, Wole Oshin and his counterpart in UACN, Folasope Aiyesimoju also commented on the transaction providing reasons for consummating the deal.
- According to Wole Oshin of Custodian Investment, “The rationale for the Transaction is that Custodian and UAC share the view that their ambitions for capturing opportunity in the real estate industry will be better achieved working in partnership.”
- Custodian also believes the transaction “will provide Custodian with a platform to capture arising real estate opportunities. It also immediately provides recurring cash flow visibility and attractive yields as a result of its direct exposure to Nigeria’s leading real estate investment trust (“UPDC REIT”) with a track record of profitability and annual dividend distribution which offers a good compliment for our product portfolio.”
- According to Folasope Aiyesimoju, Group Managing Director of UAC, “UAC received a credible offer from Custodian. The terms of the offer compelled the Board to re-evaluate the planned approach to de-consolidate UPDC and influenced the Board’s decision to proceed with the sale of a portion of UAC’s interest in UPDC to Custodian, effectively putting an end to the UPDC Unbundling.”
What they stand to gain from this deal
The two companies also revealed what they stand to gain from this transaction. According to Custodian, it decided to acquire for the following reasons;
- The company claims it is attracted to the ‘recurring cashflow visibility from UPDC REIT citing the huge cash flow it hopes to enjoy from rental income
- “The UPDC REIT is highly cash generative with recurring income streams. It has distributed an average of N1.4 billion p.a. over the last five years. Rental income from UPDC REIT is underpinned by leases with first-tier tenants. This presents a good match for our business.”
- Custodian also mentions the N10 billion in assets for sale on the books of UPDC which it will focus on “realising”.
- For UAC, while it will no longer be pursuing its deconsolidation strategy for UPDC, it will still retain part ownership of the company but will cease to have it as a subsidiary of UAC operating as a standalone.
- UPDC will now be a subsidiary of Custodian Investment.
UPDC’s Challenges
- UPDC reported a loss after tax of N15.8 billion in 2019 and has accumulated over N33 billion in losses since 2016.
- However, its REIT business has faired better reporting a pre-tax profit of N816.5 million in the first half of 2020. It has consistently declared dividends.
- UPDC collected about N956 million in cash distribution from UPDC Reit in 2019 alone.
- UPDC has undergone several restructuring since Themis Capital acquired majority ownership in UACN in 2018. However, it was unable to stop the hemorrhaging of losses.
Access Bank Plc. completes its acquisition of Transnational Bank Plc., following its earlier announcement on October 28th 2019 as well as its receipt of full regulatory approvals and fulfilment of all conditions precedent to completion.
The notice which was disclosed in a corporate disclosure on the Nigerian Stock Exchange read, “The Bank’s vision is to be the World’s Most Respected African Bank and our entry into the Kenyan market, a gateway in East Africa, not only brings us closer to that vision but enables our customers tap into our extensive global network that translates into immense business opportunities, robust and efficient digital solutions, competitive products and unrivalled customer experience.”
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Mr. Herbert Wigwe, Managing Director/ Chief Executive Officer, commenting on the acquisition said, “We are excited to make an entry into the vibrant Kenyan market. We pledge to put our customers at the forefront of everything we do. Through the creation of a world class payment system, we will build and support our wholesale and retail customers using our strong customer insights to deliver beyond their expectations.”
The company has been carrying out a myriad of expansionary projects in recent time. Just two weeks ago, Access Bank Zambia Limited announced that it was in advanced discussions with Cavmont Capital Holdings Zambia Plc. regarding a possible merger of Cavmont Bank Limited.
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Access Bank Plc. recorded a profit after tax of N40.9 billion in the first quarter period ended March 31st, 2020. It had recorded an increase in Net interest income which was N72.2 billion in the period, indicating a 27% increase juxtaposed with the N56.8 billion that was recorded in Q1 2019.
Its shares at market close today stood at N6.10, on the lower end of its 52-week range of N5.30 and N12.00. Its price to earnings ratio was 2.86 and price to book, 0.34.
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