Transaction Capital wants to raise R900m-R1.25bn by issuing and selling shares in WeBuyCars before its planned unbundling and separate listing of the profitable second-hand car dealer.
By selling new shares to asset manager Coronation and issuing new shares for the new investors to buy into WeBuyCars, it will reduce its 74.9% holding in the used car dealer to 57%-67%.
Part of the money it makes will go to repaying R1.1bn in revolving credit at a holding company level and remove the liability Transaction Capital has if its ailing SA Taxi division defaults on its debt, which as things stand could force the parent to cough up to lenders.
Fund manager Coronation, which owned about 18% of Transaction Capital at end-September, according to the annual report, will buy 11.3% of new WeBuyCars shares for an estimated R760m.
The group said this showed the investment manager’s confidence in that business.
The capital-raising exercise will also involve a proposed book-building process to issue new WeBuyCars shares to the value of R750m.
Transaction Capital’s SA Taxi is heavily indebted to the tune of more than R17bn and at risk of defaulting on about R5bn of this. It has already missed a debt repayment from subsidiary SA Taxi Development Finance.
In its annual report released last month Transaction Capital admitted that there was a risk of cross-default from SA Taxi to the holding company. This is even as WeBuyCars and another subsidiary, Nutun, do not have any exposure to SA Taxi debt.
However, it said the unbundling of WeBuyCars and “value unlock” would help it remove the cross-defaults in place.
Money from the unbundling and issuing of shares will also be used to repay R285m due by March 7, which is owed as part of its support for the BEE deal in which the SA National Taxi Association (Santaco) took a 25% stake in Transaction Capital. That Santaco stake in Transaction Capital is now worth less than the debt it raised to buy it, as the share price has plummeted more than 75%.
The existing shareholding in WeBuyCars held by founders of the business Faan and Dirk van der Walt will be reduced from 25.1% to 10% as part of the unbundling.
Transaction Capital had a contractual option to buy the Van der Walt’s stake but this will be cancelled with the unbundling.
WeBuyCars will probably list on the JSE in April, subject to shareholder approval.
Transaction Capital claims it trades at a discount to its underlying value, common for almost all investment holding firms. It shares have also lost enormous value given the troubles at SA Taxi.
The new listing will allow shareholders to hold a stake in its most profitable division while not being exposed to SA Taxis or debt collector Nutun, which has been struggling to raise capital to expand, the firm said recently.
Transaction Capital said on Tuesday that WeBuyCars stands out from its competitors because of its “proprietary artificial intelligence, data and analytics capabilities, which optimise the vehicle buying and selling process”.
Sponsored research conducted by Anchor Stockbrokers and paid for by Transaction Capital found WeBuyCars can calculate a price for a used car within 30 minutes — making the process of trading in a used car much quicker than at its competitors.
Anchor said WeBuyCars benefited from the fact that SA’s used-vehicle sales are about 2.2 times larger than those of their new counterparts. Given the churn within the 11.2-million vehicles on SA roads, it is common for vehicles to exchange hands more than five times, it said.
“WeBuyCars has the flexibility to sell and finance older, cheaper vehicles that original equipment used car dealerships don’t have, making it adaptable to changing market conditions. This has ensured volume growth [which] has remained robust during the past 18 challenging months.”
Update: February 16 2024
This story has been corrected to reflect that sponsored research was conducted by Anchor Stockbrokers and not Anchor Capital. We regret the error.
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