South Africa’s third-biggest bank, Absa, and food and clothing retailer Woolworths are to enter into a joint venture, the companies said in separate statements on Wednesday.
The venture ”will provide Absa with access to customers in the retailer finance market at point-of-sale”, enabling Absa to increase its share of the consumer finance market in South Africa, Absa’s statement said.
The Absa Group has entered into an agreement with Woolworths to acquire 50% plus one share of the share capital of Woolworths Financial Services, the financial services business of Woolworths.
The purchase price payable by Absa for 50% plus one share of the issued share capital of Woolworths Financial services is R875-million, payable in cash at completion.
”Woolworths is a highly attractive retailer for Absa to partner with in South Africa in view of its premier brand, distribution network (more than 200 corporate stores) and loyal customer base (4,5-million customers),” Absa said.
”The combination of Absa and Woolworths’ know-how and resources will enable Woolworths Financial Services to become a market-leading consumer finance operation with one of the most comprehensive financial services offerings in a South African retail store network.”
Woolworths said that the proposed transaction is expected to deliver ”significant financial and operational benefits to Woolworths Financial Services through access to Absa’s funding, leading credit risk and customer value-management capabilities, and expertise in enhancing existing and launching new consumer finance products including a premium Barclaycard offering”. — Sapa