As expected Transaction Capital announced today it is increasing its shareholding in WeBuyCars, a South African online car marketplace. The JSE-listed company disclosed 15 days ago its intention to up the stake.
Transaction Capital has concluded agreements to increase the group’s shareholding in WeBuyCars from 49.9% to 74.9%. The remaining 25.1% of the shares in WeBuyCars will be held by the family trusts of the founding shareholders, Faan and Dirk van der Walt.
The group expects the additional investment of 25% in WeBuyCars which is subject to Competition Commission approval, to be immediately value and earnings accretive. Once the conditions precedent are met and the proposed transaction takes effect, Transaction Capital will be able to consolidate a greater proportion of WeBuyCars’ high-growth earnings.
“Should the proposed transaction to acquire control of WeBuyCars obtain regulatory approval, the exceptional growth prospects of this business will accelerate and support a sustainably higher growth trajectory for Transaction Capital,” Transaction Capital’s CEO, David Hurwitz said.
WeBuyCars is a trusted principal trader of used vehicles through its vertically integrated e-commerce and physical infrastructure, offering finance, insurance and other allied products. This uniquely composed offering, which combines customer convenience and competitive pricing, positions it well to benefit from the current market context.
Private vehicles remain a necessity and an aspiration for many South Africans, given long travel distances and limited public transport options. In South Africa, a total of around 11 million passenger vehicles are in circulation. This vehicle ‘car parc’ has grown steadily, increasing the overall market by 5% to 6% a year over the last decade.
As disposable incomes come under added strain and new vehicle prices rise, consumers will continue to trade down from new to used vehicles. Besides the constraints to affordability, the disruption of global vehicle production during the pandemic has led to stock shortages in certain new vehicles, driving demand for used vehicles up even further.
On 11 September 2020, Transaction Capital acquired a 49.9% non-controlling stake in WeBuyCars pursuant to a transaction concluded with WeBuyCars and its shareholders. This initial transaction included options that, if exercised, would enable Transaction Capital to acquire a further 25% shareholding in WeBuyCars by 2023.
However, the opportunity arose to cancel those agreements in favour of entering into a transaction that would result in Transaction Capital holding a controlling stake of 74.9% in WeBuyCars.
“We have been impressed with the insights of the directors appointed by Transaction Capital to the WeBuyCars board, the manner in which Transaction Capital has engaged with leadership teams in its subsidiaries and the cultural fit between the two organisations,” said WeBuyCars CEO, Faan van der Walt.
“Further, we have seen the operations of SA Taxi and believe that Transaction Capital has the necessary expertise to advance WeBuyCars’ vision of offering credit and insurance related products to its customer base.”
Transaction Capital has a proven track record of creating value through identifying, investing in, and developing businesses with the potential to achieve scale in their market segments. A controlling stake will enable Transaction Capital to achieve this more effectively with WeBuyCars.