Financial services firm Nedbank Group has entered into an agreement to acquire 100% of the issued share capital of fleet management solutions provider Eqstra Investment, subject to regulatory approval, from JSE-listed enX.
"A combined Eqstra and NedFleet operation will provide an integrated approach to fleet management, aimed at providing better quality, cost and scale to our joint clients," says Nedbank Group retail and business banking managing executive Ciko Thomas.
"The acquisition will also expand Nedbank’s product and services offering in Namibia and eSwatini and expand Nedbank Group’s footprint into a new jurisdiction in Africa, being Botswana," he points out.
Eqstra offers fleet management services to business clients in South Africa and some Southern African countries. It is envisaged that this transaction will enhance and complement Nedbank’s fleet management business offerings in a way that is set to converge Nedbank’s Internet-based fleet management system with Eqstra’s fleet-management service suite, which will benefit both entities’ existing and future client base.
"Our new partnership with Nedbank promises to enhance our service offerings and accelerate our growth. This acquisition combines our fleet management expertise and custom-designed, leading-edge enterprise systems with Nedbank’s client base, financial strength and technical resources.
"We are committed to a seamless transition and look forward to scaling our operations, continuing to invest in advanced technologies and expanding our service offerings," says Eqstra CEO Jacqui Carr.
In a note to shareholders explaining the rationale for the transaction, enX says its continued ownership of Eqstra may limit the fleet management solution provider's growth prospects and restrict the returns that can be delivered to enX shareholders.
This is owing to the fact that enX may face challenges in securing the necessary capital at a scale that Eqstra requires for aggressive market growth, diversification of its asset base and an increase in its credit risk appetite; that enX is, as a nonbanking entity, at a disadvantage in raising funds at competitive rates, which is crucial for Eqstra to maintain sustainable competitiveness, particularly against South African banks; and Eqstra is currently maintaining equity buffers in excess of what would be ideal, impacting on its ability to yield returns above its equity cost of capital.
"The board believes that Nedbank, addressing the concerns highlighted above, is well positioned to facilitate value-enhancing opportunities through access to significant capital resources at lower costs and enabling a reduction in equity buffers," enX states.
The transaction has an enterprise value of R2.52-million.