Transaction has big plans

• Talks could lead to financier taking majority control, global expansion

Transaction Capital, one of SA’s largest financiers of minibus taxis, has begun negotiations to increase its minority stake in WeBuyCars that could cause it to take control of one of the country’s largest second-hand car businesses and possibly expanding it internationally.

Transaction Capital, one of SA’s largest financiers of minibus taxis, has begun negotiations to increase its minority stake in WeBuyCars that could cause it to take control of one of the country’s largest second-hand car businesses and possibly expanding it internationally.

The company issued a cautionary statement on Wednesday that alerted shareholders to negotiations that could cause it to increase its stake to 74.9% from 49.9%, just a year after it acquired its stake.

“The existing shareholders are very comfortable with us as partners. They have been able to see how we can help grow the business and they approached us. While it is obviously at a very early stage, we love this business and think there could be some type of global angle to expanding it,” says Transaction Capital CEO David Hurwitz.

Transaction Capital reported interim results to end-March on Wednesday reflecting a sharp rebound in profitability. Core headline earnings of R437m were 56% higher than those of the previous matching period.

Comparing the half-year results with 2019’s pre-Covid half-year performance, the group’s core headline earnings from continuing operations were 29% higher. The group resumed payment of an interim dividend, with a distribution of 19c per share declared for the current period.

The group bought its stake in WeBuyCars in September last year for R1.84bn, and says the deal has been earnings and value accretive. The division contributed R113m to core headline earnings for the period. At the time of acquisition, WeBuyCars was trading 6,000-7,000 cars monthly. Transaction Capital reported that in March the business bought and sold about 8,000 cars and is still on track to meet its medium-term target of 10,000 vehicles a month.

Hurwitz says Transaction Capital continues to be impressed with the performance of the business and looks forward to the negotiations on taking a controlling stake. The proposed transaction would cause Transaction to acquire Fledge Capital’s stake, while the founders of the business, Dirk and Faan van der Walt, will retain a 25% stake.

“We are comfortable with the way the business trades, and the calibre of the management team running it. The business is very resilient. We have looked at the big second-hand car platforms in Europe and the US, and we think we compare favourably to international peers, so there really could be an opportunity to do something,” says Hurwitz.

Transaction Capital’s share price rose 0.29% to R34.10 on Wednesday.

WE ARE COMFORTABLE WITH THE WAY THE BUSINESS TRADES, AND THE CALIBRE OF THE MANAGEMENT TEAM RUNNING IT

David Hurwitz Transaction Capital CEO