Transaction Capital in talks to acquire controlling stake in WeBuyCars dealership

TRANSACTION Capital was in talks to acquire a controlling stake in usedvehicle dealer WeBuyCars, it said yesterday as it reported its interim results, which saw it resume paying dividends.

The taxi financier was in negotiations to hike its shareholding in WeBuyCars from the current 49.9 percent to 74.9 percent.

Transaction Capital chief executive David Hurwitz said yesterday that consumers were increasingly opting for used vehicles, which was driving growth in this sector as disposable income comes under strain and new vehicle prices continue to rise.

Hurwitz said the growth prospects of the WeBuyCars business would accelerate and support a sustainably higher growth trajectory should the transaction be concluded successfully.

WeBuyCars is currently owned 60 percent by the family trusts of founders Faan and Dirk van der Walt, 31.5 percent by Fledge Capital and 8.5 percent by minority shareholders.

In March last year, the Competition Tribunal prohibited a proposed transaction by MIH eCommerce Holdings, which is owned by Naspers, to acquire control of WeBuyCars.

In September last year, Transaction Capital bought a 49.9 percent stake in WeBuyCars for R1.84 billion after raising R1.2bn of new equity over the past 12 months.

Hurwitz said

WeBuyCars’ digital capabilities and credible e-commerce platform would support even higher growth in the medium term.

“In addition, WeBuyCars continues to expand its geographic footprint and plans to develop additional vehicle supermarkets and buying pods in select high-demand locations across South Africa to support growth,” Hurwitz said.

In the six months to the end of March, Transaction Capital resumed paying dividends, with declaration of interim dividend of 19 cents per share following a strong recovery in earnings in the 2021 financial year.

The group reported core headline earnings of R437 million in the six months to the end of March, up 56 percent from the prior year. It said this demonstrated a compound annual growth rate of 17 percent over the past seven years. Core headline earnings per share from continuing operations grew at lower rate of 43 percent to 65.5 cents, due to the value and earnings accretive issue of 59.6 million shares in the past 12 months

“This performance was driven by a combination of organic growth from the group’s divisions, SA Taxi and Transaction Capital Risk Services (TCRS), and acquisitive growth from the WeBuyCars investment,” it said.

Hurwitz said: “Our business models have gained in relevance in this Covid-19 environment. At SA Taxi, minibus taxi remains the largest and most vital service in the public transport network, while other modes of public transport have floundered. At TCRS, Covid-19 has increased indebtedness and impaired consumers’ ability to service debt, creating larger NPL (non-performing loan) portfolios for TCRS to manage or acquire. And, at WeBuyCars, as consumers’ disposable income comes under strain and new vehicle prices continue to rise, consumers are increasingly opting for used vehicles driving growth in this sector.”

Looking ahead, he said headline earnings per share for the full year should exceed 2019 levels, in line with pre-pandemic growth rates.

“Over the medium term, we are confident the group will maintain a sustainable trajectory of superior high-quality earnings and dividend growth,” Hurwitz said.

Transaction Capital shares closed 0.29 percent higher at R34.10 on the JSE yesterday.