JSE-listed specialist financial services group Ecsponent has announced the conclusion of an agreement in respect of its investment in Luxemburg-based and Frankfurt Stock Exchange listed fintech innovator MyBucks.
Ecsponent’s investment in MyBucks forms part of its portfolio of investments in its Equity Holdings business unit. The portfolio comprises diversified investments representing assets in high-growth areas.
MyBucks is an internationally listed group offering a high technology, high profit margin business, while providing significant barriers to entry. Additionally, in a region where just 17% of the population have bank accounts but 80% have mobile phones, the opportunity for fintech innovations to bank the unbanked has never been more pronounced.
Ecsponent CEO Terence Gregory says: “Fintech is already bridging significant infrastructure gaps hampering the ease of transacting in Africa, which also means that the industry is in the right phase for investment now. All our investments have specific exit parameters and the MyBucks investment is no different. This agreement gives us a defined exit strategy over the next five years. Equally significant is the fact that the agreement mitigates the Group’s downside valuation risk without limiting an opportunistic upside realisation.”
The Ecsponent group currently holds 38.94% of the issued share capital in MyBucks. The agreement with the Claymore Private Foundation (Claymore), a consortium of private investors, determines that Claymore will have a call option until 31 December 2023 to purchase all MyBucks securities held by the Ecsponent group. The agreed strike price will be at €14 until 31 December 2019 and increase by one Euro each year until 2023 when the strike price will be €18.
Should Claymore choose not to exercise this call option before 31 December 2023, Ecsponent may exercise its put option, at a strike price of €18 to acquire all MyBucks securities held by Claymore, providing it with a controlling stake in the company.
Gregory adds: “The MyBucks group holds various banking licenses, the intellectual property rights on bespoke artificial intelligence (AI) developments and scalable credit scoring systems. Depending on market developments and consumer requirements, there could be value in developing these assets in future. The put option will give us the ability to acquire the majority shareholding in MyBucks, enabling the Ecsponent group to influence how these assets are commercialised in future. The timing of our option is such that the business would have reached maturity, resulting in a positive impact on the Group’s balance sheet.
“One of the contributors to our success is our agility, which allows us to take advantage of opportunities as they arise. The other is to identify growth assets and discern the best timing to invest in and exit our investments. These agreements give us a framework to apply these strengths with ease in future,” Gregory says.