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The Portuguese Council of Ministers on Thursday announced its approval of the sale by Caixa Geral de Depósitos (CGD) of its entire stake in Mercantile Bank to Capitec Bank.
CGD, which owns 100% of Mercantile, is selling the bank as part of a strategic recapitalisation plan approved by the European Commission and requiring CGD to reduce its foreign assets.
Capitec, Nedbank and the PIC were on the shortlist of potential buyers.
CGD was one of three Portuguese banks granted aid by the European Central Bank and European Commission in the aftermath of the global financial crisis of 2008.
Capitec, traditionally a retail bank, bid to purchase Mercantile Bank in a move to formally enter the business banking space.
Karl Kumbier, CEO of Mercantile Bank, said Capitec will be an amazing partner.
"We are proud that a bank of Capitec's stature has decided to buy Mercantile instead of trying to build a business bank from scratch," he said.
While the sale agreement remains to be signed by all parties involved and is subject to approval by the relevant South African regulatory bodies, Kumbier said the bank is looking forward to the next phase of its growth journey.
Kumbier anticipates that Mercantile's experience and expertise in serving small and medium-sized businesses will bring great value in targeting this generally under-served market.
"We believe that combining Capitec's brand, its ability to scale, and its experience in disrupting the consumer banking market with Mercantile's experience and skill in business banking will allow us to build a world-class business banking offering that will evolve to consistently address the unique needs of all South African entrepreneurs,” he said.
André du Plessis, chief financial officer of Capitec Bank, told Fin24 they are very happy with the transaction.
"We put in a lot of effort with due diligence and meeting with management to make sure we are doing the right thing. This brings our strategy to move into business banking forward," said Du Plessis.
In his view, Capitec was selected from the eventual short list because of the combination of it having put in a bid at the right price and also because of its strategy in terms of what it plans to do with Mercantile Bank.
"We want to expand it and not strip it out and just use parts of it," explained Du Plessis.
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