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Johannesburg – Capitec, Nedbank and PIC are on the shortlist of four potential buyers to participate in the second phase of the sale process of Mercantile Bank, following approval by the Portuguese government.
This will allow the sale process of Mercantile by Portuguese State-owned banking group Caixa Geral de Depósitos SA (CGD) – also the largest bank in Portugal – to progress to the next phase.
CGD has received 18 non-binding offers for Mercantile, the sole shareholder of Mercantile Bank Limited. CGD announced its intention to sell Mercantile, a niche business and commercial bank specialising in serving entrepreneurs, last year.
The sale formed part of a restructuring plan required and approved by the European Commission, involving the reduction of GCD's foreign assets.
In a statement Mercantile said potential buyers were selected based on criteria set out in Portuguese law, which included, among others, price, financial capacity and strategy.
The shortlist
The four buyers on the shortlist are:
- A consortium comprising of Arise BV and Grindrod Bank Limited. Arise is an African investment company backed by Norfund, a Norwegian investment fund for developing countries; FMO, a Dutch development bank; and Rabobank, a Dutch cooperative bank;
- Capitec Bank - SA’s largest retail bank based on the number of customers who use it as their main bank. It has a market capitalisation of over R101bn and PSG Group as its largest shareholder;
- Nedbank Group - the fourth largest bank in SA, ranked by assets. It has a market capitalisation of over R140bn.
- A consortium comprising of the Public Investment Corporation (PIC) and Bayport Financial Services. The PIC is Africa’s largest asset manager, managing public sector funds in excess of R1.9trn. Bayport Financial Services is one of the largest non-bank providers of unsecured credit and allied products in SA.
The shortlisted potential buyers will be given the chance to conduct a due diligence process on Mercantile, including a full-day strategic engagement with Mercantile's board and management, the bank said.
This will be followed by the submission of binding offers.
Capitec confirmed in a note to shareholders on Monday that its wholly-owned subsidiary Capitec Bank has made a non-binding offer to purchase Mercantile.
"Capitec Bank is one of a number of interested parties whose non-binding offer to purchase Mercantile has been accepted. Capitec Bank will now commence with a formal, in-depth due diligence exercise to determine whether the opportunity presented by Mercantile fulfils Capitec Bank’s expectation to build the Capitec Bank business bank strategy," the note read.
Capitec said it continues to investigate strategic opportunities to enhance shareholder value and deliver to its commitment to the market in offering affordable, simple and transparent banking services.
The entire process is expected to be finalised by the end of 2018, with final approval by the Portuguese government and with completion being subject to South African regulatory approvals.
Mercantile CEO Karl Kumbier told Fin24 on Monday that part of the restructure arrangements in Portugal involved looking at core and non-core operations. It was decided that SA did not fall under the core operations.
He said the fact that 18 offers were received is a testament to the hard work of the local team the last few years.
"We have the right strategy and we have fantastic products and services. We offer a full suite of products and will continue to grow in our niche business as only commercial bank in SA aimed exclusively at entrepreneurs. We also have a good use of technology in general," said Kumbier.
He said the bank was pleased with the quality of potential buyers. "I believe interest in Mercantile from companies of this calibre is not only testament to the quality of our business, but also of our team."
Kumbier said he was "excited that each of these potential buyers could open up new opportunities for Mercantile and add great value to our business, just as we can add great value to theirs".
It was "very positive" for South Africa to see foreign players willing to make long-term investments, he added. "Their interest in Mercantile not only shows that they believe in the growth potential of our business, but also in the potential of the South African entrepreneurs we serve."
Mercantile’s financial results for the year ending 31 December 2017 saw its net profit after tax climb by 20% to R213m. Mercantile’s assets grew by 9% in 2017 to R13.4bn and deposits grew by 10% to R9.3bn.
The CEO previously said that while 2017 was a tough year for the SA economy, the results showed the bank had experienced a "fantastic run".
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