Fintech group Capital Appreciation (Capprec) has agreed to buy local software engineering and development company Dariel Solutions for R131.2m as it looks to invest in established companies that deliver innovative and disruptive solutions to mainly institutional clients.
“Digital transformation, as well as an acceleration in demand for electronic payments, cloud services and related solutions continue to support robust industry growth prospects over the medium term,” the company, valued at R2bn on the JSE, said on Monday.
“Given Dariel’s participation in initiatives responsive to these trends, the acquisition offers Capprec further growth potential, as well as further investment and acquisition opportunities to broaden Capprec’s portfolio of services,” it added.
Following news of the deal, the share rose more than 3% during the day, paring some of the gains to close 1.31% higher at R1.55, giving the group a R2.03bn market cap.
Dariel, founded in 2001, is the holding company of Dariel Software and focuses on software for financial institutions and the fintech sector.
The deal, which is subject to regulatory approval, will be settled by a combination of cash and ordinary shares after an agreement was reached with Dariel’s founders — Malcolm Rabson, Gregory Vercellotti and Wayne Yan — and its directors.
“The founders and directors of Dariel will remain with the business and have entered into long-term executive employment agreements with Dariel Software,” Capprec said.
Capprec’s business includes selling payment terminals such as point-of-sale devices and debit and credit card machines.
It also provides the back-end systems that allow these devices to accept payments and the technology that banks and other financial services companies use to add more features to their digital platforms, including loyalty programmes and prepaid vouchers. Capitec, Nedbank and Old Mutual are among its customers.
If all goes to plan, the acquisition will be implemented by August 31, with Dariel becoming part of Capprec’s software division.
In terms of the deal, Capprec will first pay R46.9m in cash and distribute 25.24-million shares at R1.52 apiece, amounting to R38.4m.
At the end of March 2022, the value of Dariel’s net assets were R39.2m, rising to R47.8m a year later.
Dariel’s core earnings (ebitda) and profit after tax at the end of March were R23.8m and R16.2m, respectively.
Capprec CEO Bradley Sacks said: “Dariel fits our model of investing in established, asset-light companies that deliver innovative and disruptive fintech solutions to mainly institutional clients, with a culture and business ethos well-aligned with that of the group.
“We have experienced significant growth in our businesses due to accelerating digital transformation and the robust demand for cloud services, online applications, data intelligence, electronic payments and other innovative software solutions.”
Business Day reported in November that Capprec is no stranger to acquisitions since listing as a special purpose acquisition company on the JSE and raising R1bn through a private placement of shares in late 2015.
Since then, it has acquired 100% of African Resonance, Dashpay and Synthesis Software Technologies, as well as a 17.45% interest in Resonance Australia. It also has a 35% stake in government messaging platform GovChat.
During its most recent financial year, the company acquired 100% of Responsive Technology group and Responsive Digital, as well as 71% of Rethink Digital Solutions. Responsive Digital designs and develops digital applications for clients in SA, the US, Europe and the UK.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.