South Africa’s WeBuyCars (WBC) has listed on the JSE as part of its majority owner’s plans to unlock shareholder value.
In advance of the listing, Transaction Capital, which owned a 74.9% of the company, and WBC have raised a total of USD 49mn (ZAR 902.7mn) at a price of ZAR 18.75 per WBC share by issuing 40mn authorised WBC shares for ZAR 750mn and by TC’s sale of 8.145mn WBC shares by Transaction Capital totalling ZAR 152.7mn.
Rationale
Transaction Capital owns majority stakes in three underlying businesses: Mobalyz (SA Taxi and Gomo), WeBuyCars and Nutun. Last year, SA Taxi’s performance disappointed, leaving a negative impact on the broader Transaction Capital group. Listing WeBuyCars, with its strong performance over the past twenty years, is an opportunity to, among others, significantly reduce debt levels and remove the cross-default triggers that are currently in place.
Therefore, the listing gives the retail market direct access to a high-performing and well-known business that generates strong cash flows.
The South African market for used cars…
The South African car market, what WBC refers to as the country’s carpool, is comprised of approximately eleven million vehicles, the majority of which are second hand and is the market the company focuses on and which continues to grow.
According to WeBuyCars, in 2005 the pre-owned market stood at 64% vs. 36% for new cars. In 2022, it was 70% for pre-owned cars and 30% for new cars.
In the market for new cars, 50,000 new vehicles are sold every month, meaning a total of 600,000 are sold per annum, with these cars held for roughly five years and second hand ones approx. two.
…and WeBuyCars’ place in it
While most of the company’s competitors focus on the first one or two transactions, WBC competes just as intensely for a year old car as it does one that is twenty. And this means that of the 150,000 used vehicle registrations in the country, the volume of vehicles bought and sold by the company is approx. 14,000, giving it a market share of 10%.
After the listing, WeBuyCars plans to grow this to 23,000 vehicles per month within the next four to five years by expanding its footprint across the country by opening vehicle supermarkets in new locations and growing its number of buying pods. Furthermore, investments made in its proprietary ERP system means that data it owns on older vehicles that are six years older or more place it in a unique position to grow as these cars make up 73% of the used car market.
PSG Capital acted as lead transaction adviser, while Pallidus acted as joint transaction adviser. Cliffe Dekker Hofmeyr and ENSafrica provided legal advise to WeBuyCars and Transaction Capital, respectively.