Johannesburg-listed alternative investment firm Transaction Capital has inked an agreement to fully acquire WeBuyCars over a five-year period after striking a deal to get a controlling stake earlier this year.
Transaction Capital has entered into a put-call option agreement with the founding shareholders of WeBuyCars, Faan and Dirk van der Walt. If the option is exercised, it could result in the firm buying the remaining 25.1% stake it doesn’t already own in WeBuyCars in tranches.
The founders have a put option to divest a stake of around 7% each in 2023 and 2024, with the final clause to offload the remaining stake by 2026.
Similarly, Transaction Capital has a call option to buy around 15% by 2024 and the remaining amount by 2026.
The proposed deal value was not disclosed but it is to be paid either 100% in cash or 70% in cash and 30% through issue of Transaction Capital shares.
The deal value is likely to be a mark-up to the value of the transaction earlier this year when Transaction Capital agreed to increase its holding to 74.9% for ZAR1.6 billion ($116 million). It had previously paid ZAR1.8 billion in September last year for 49.9% of the business.
The latest deal had valued WeBuyCars around 8.9 times price-to-earnings ratio on its estimated earnings for 2020-21.
Earlier this year, Transaction Capital said it was buying a 10% stake at the same valuation at which it had purchased 49.9% last year. It paid a premium for another 15% stake after factoring in the projected profit for the current fiscal year.
Transaction Capital had also said it was paying a sum for the properties held by WeBuyCars and a deemed dividend of 50% of the profit to the current shareholders. The investment firm would pay about 80-85% of the total amount in cash and the rest in terms of its fresh shares.
The profit after tax attributable to WeBuyCars for the financial year ended March 2021 was ZAR384.9 million. Headline earnings grew 38% to ZAR257 million for the six months ended March 2021.
Prior to the entry of Transaction Capital, WeBuyCars was 60% owned by its founders. The balance stake was held by Fledge Capital, an investment firm that counts billionaire Patrice Motsepe’s Africa Rainbow Capital Investments as a 51% stake owner.
WeBuyCars has a two-decade-long track record with a vertically integrated, data- and technology-led e-commerce and physical infrastructure. This is supported by a national footprint that includes seven vehicle supermarkets and 19 buying pods.
The hybrid-model company competes with larger but mainly franchise dealer offline peers Motus and Bidvest Automotive in the home market. It had revenue of ZAR389 million in 2019 and sold about 66,000 vehicles through its platform. Large global digital-first used-car sales platforms include Carmax, Carvana and Vroom.