In a deal for R1.5 billion ($94.3m), a consortium managed by Ethos’ Mid-Market Fund I (EMMF I) and included Patrice Motsepe’s African Rainbow Capital (ARC) has acquired Fintech business Crossfin.
Crossfin’s initial investors, Capital Eye Investments and the Multiply Group, which have been anchor shareholders since 2017, will leave the transaction, which is one of the largest private equity-led investments in South African Fintech sector.
“We believe this is an exciting opportunity underpinned by strong tailwinds in a cutting-edge industry. Crossfin is ideally positioned to continue capturing the payments technology and the broader Fintech opportunity, both existing and emerging. The transaction is an exceptional opportunity to acquire a group with significant value creation momentum,” Edward Pitsi, managing partner at EMMF I and deal lead said.
The EMMF I and ARC consortium, which includes the founding Crossfin executive management team and Ethos Artificial Intelligence Fund I, said the deal provides the group with much-needed exposure in Fintech, a sector that is exploding as a result of digitalisation and snowballing payment technologies, according to a statement.
The consortium will also provide Crossfin with acquisition and expansion money to enable it to develop organically and pursue new possibilities across South Africa and Africa, according to the conditions of the agreement.
“Crossfin has a capable management team in place that we are confident will continue to add significant value to what is already an impressive track record underpinned by quality and high-growth businesses. We are confident that Crossfin will play a key role in reshaping the financial services landscape and continue to innovate and pioneer as it has done in the past,” Charmaine Padayachy, ARC deal executive, said.
Crossfin’s portfolio includes approximately 134 million card and 20 million mobile-enabled payment transactions per year, totaling over R79 billion in value. Payment technology, smart funding, and venture capital are the three divisions of the company, which recently bought EOH subsidiary Sybrin as part of another consortium for R410 million.
Sybrin is a low-code and artificial intelligence (AI)-enabled enterprise software company that focuses on automation and the application of AI and machine learning in the finance sector.
For Motsepe’s investment arm, ARC, the consortium will purchase 37.33 percent of Crossfin for R600 million, assuming a mix of acquisition money from existing shareholders and growth capital for targeted portfolio purchases.
The deal is consistent with ARC’s objective to develop an ecosystem of Fintech-related businesses, according to the company, which has stakes in a variety of sectors including telecoms.
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