Transaction Capital sells unsecured lending business for R1.3bn
Transaction Capital’s second disposal in two months takes its cash to R2.2bn, nearly half of its R4.6bn market capitalisation.
TRANSACTION Capital on Wednesday sold its unsecured lending business Bayport in a management buyout for R1.3bn ”” its second disposal in two months, taking its cash hoard to R2.2bn. This represents nearly half of its R4.6bn market capitalisation.
It remains to be seen how much of this will be used for acquisitions, and how much is likely to be returned to shareholders in dividends.
Commenting on Transaction Capital’s war chest of about R2.2bn, CEO Mark Lamberti said in an interview on Wednesday: "I think that’s almost half of our market capitalisation. No company can sit with that cash, almost half of its market cap."
In 2010, Transaction Capital acquired 82.65% of Bayport Financial Services for R650m from Bayport Management Limited (BML).
On Wednesday, Transaction Capital said it had sold all its shares in Bayport Financial Services back to BML, along with its stake in Zenthyme Investments, for R1.3bn.
The sale comes two months after Transaction Capital sold its subsidiary Paycorp to private equity firm Actis for R937m. On what Transaction Capital planned to do with the cash, Mr Lamberti said: "We are looking for things that can easily be bolted on."
BML, which operates in six African countries and Columbia, started operating Bayport Financial Services in South Africa in 2005.
Mr Lamberti said Transaction Capital previously had ambitions to acquire the other African operations of BML. But the acquisition would have been dilutive to Transaction Capital’s shareholders.
An acquisition of BML would have also increased Transaction Capital’s headline earnings generated from unsecured lending, to 65%. When Transaction Capital posted its results for the six months ended March, Bayport Financial services contributed about 38% to the group’s headline earnings.
For its interim results, Transaction Capital posted headlines earnings of R233m. In this set of results, Bayport Financial Services posted headline earnings of R89m.
Transaction Capital also indicated in a regulatory announcement on Wednesday that "negative sentiment around the unsecured lending sector has caused the market to ignore the specific outperformance of Bayport Financial Services".
Bayport Financial Services has a loan book of about R5.4bn.
Transaction Capital will have to find ways to replace the earnings that have gone with the disposals of Bayport Financial Services and Paycorp.
In the six months to end March, Paycorp, which owns automated teller machines, posted R28m in headline earnings.
This means from Bayport Financial Services and Paycorp, Transactional Capital made about R117m in the six-month reporting period. Mr Lamberti said Transactional Capital would find "creative" ways to grow earnings.
However, he noted that even with the sale of Paycorp and Bayport Financial Services, Transaction Capital would still grow its earnings in line with the guidance issued to shareholders following its listing on the JSE last year.
Mr Lamberti previously said that over the next five years, Transaction Capital would grow its revenue by about a mid-teens figure in percentage terms, and its profit to the early- to-mid-20s percentage level.
Following the two disposals, Transaction Capital’s earnings will mainly come from asset-backed lending, which is dominated by SA Taxi, the specialist financier of minibus taxis.
The company also operates MBD Credit Solutions, which collects debt on behalf of credit providers.
Shares in Transaction Capital ended down 1.74% at R7.90 on Wednesday.