R360 million private placement - M

Corporate Adviser
R360 million private placement
INVESTOR
PRESENTATION
Strong
Board
Strong
Strategy
Strong
Pipeline
•
Overview
•
What is a SPAC
•
Strong Board
•
Strong Strategy
-
What is FinTech
FinTech Investment Environment
FinTech Segmentation
FinTech Opportunities -Banking Segment
M-FiTEC Acquisition Criteria
•
Strong Pipeline
•
Costs – Expected Listing, Transaction and Operating
•
Details of Private Placement
•
Appendices
Contents
•
Newly formed M-FiTEC International plans to raise up to an initial R360 million by way of
a private placement and list by way of introduction as a Special Purpose Acquisition
Company (“SPAC”) on the AltX of the JSE
•
With the proceeds, M-FiTEC aims to build a developing markets Financial Technology
(“FinTech”) group through executing shareholder approved acquistions in an increasingly
attractive investment segment
•
While new to South African investors, SPACs have been widely used in the USA and the
UK and more recently in Canada
•
M-FiTEC has assembled a board of directors (“Board” or “Directors”) with the appropriate
experience, resources, knowledge, and relationships to source attractive acquisitions to
implement the strategy
•
The Directors have committed R18 million
Overview
3
A SPAC is a publicly traded acquisition company that uses the money raised to finance the
acquisition of operating companies (“Viable Assets”) within a 24 month period.
It allows public investors to co-invest with an experienced board of directors in a private equity like investment
but with advantages of liquidity and downside protection.
Shareholders’
Equity
Acquisition within
24 months
Acquisition
Target
Companies
Acquisition of
operating companies
Listed
Investment
Holding
Company
DIRECTORS
TARGETS
JSE
Credible Board with
• Experience in running a listed group
• Success in driving growth
• Experienced operators& investors
• Good deal flow network
• Must have subscribed for shares in
the company representing at least
5 % interest
Companies targeted for acquisition must
comply with the requirements to list on on
the JSE and be approved by
a majority of disinterested directors and a
majority of shareholders in General
Meeting.
Once listed the company is required to
comply with the JSE Listings
Requirements, adding to the credibility
and transparency of the SPAC.
What is a SPAC?
Should the directors be unable to
source Viable Assets within the
24 month period, or if the
shareholders do not vote in favour of
potential acquisitions, then the net
cash is returned to shareholders.
4
M-FiTEC has a credible Board with
-
Experience in running a listed group
Success in driving growth
Experienced operators& investors
Good deal flow network
Ability to close and structure transactions
The Directors have subscribed for shares in M-FiTEC representing
at least 5 % interest in the company at the date of listing
M-FiTEC has both Executive and Non-executive Directors
3 Executive directors receive remuneration and are focussed
on M-FiTEC activities and 6 Non-executive directors are on call
Strong Board
5
•
Directors provide right of first refusal to M-FiTEC on deal opportunities falling within the
acquisition mandate
•
Directors have transfer restrictions on their shares for 1 year from the date of the
acquisition of the Viable Assets
•
Directors receive one deferred ordinary share for each ordinary share subscribed
for at the subscription price. These deferred ordinary shares:
-
Are non-voting and do not participate in Escrow settlement in event of
non-completion of Viable Asset acquisition within 24 months
-
Will be convertible once off on the successful conclusion of an acquisition
of Viable Assets
Strong Board
6
CHARLES ROWLINSON
KEVIN BOYERS
GREGORY VOIGT
Chief Executive Officer
Chief Financial Officer
Chief Investment Officer
•
BAcc, MBA, CA(SA)
•
BCom, BAcc, CA(SA)
•
BCom, BCompt (Hons), CA(SA)
•
Succesfully built Renwick Group
over 15 years.
•
•
•
Co-founder and CEO of Chartall
Business College, a private
FET college.
Former CEO and Chairman of
EDUCOR Limited, which was
listed on the JSE.
Founding partner of Adlevo
Capital, a sub-Saharan
technology-focussed, private
equity firm.
•
Co-founder and Non-executive
director of WIZZIT Payments
(Pty) Ltd.
•
18 years corporate finance and
private equity experience with
Adlevo Capital, Brait, Capital
Partners and Axis Ventures
•
Co-founder of WIZZIT Payments
(Pty) Ltd, a pioneer in mobile
payments technology in
developing markets
•
Over 20 years experience in the
accounting profession, partner
at BDO and Grant Thornton
Strong Board
Executive Directors
7
RICHARD CAME
ROBIN FREW
CHRISTOPHER
LISTER JAMES
•
BA, MBA
•
B.Bus Sci, Bcompt (Hons)
•
•
Co-founder of Dimension Data,
Dark Fibre Africa and the Protocal
and Archway Venture Partner
Funds.
•
Non-executive director and
co-founding shareholder of Mix
Telematics Ltd, listed on the JSE
and NYSE.
BCom, HDip Acc, HDip Tax,
CA(SA)
•
Director and co-founder of
Vantage Capital.
Director of former JSE listed
Prism Payment Technologies Ltd
and director and shareholder of
Tradebridge, a transaction
solutions company
•
Non-executive director and
co-founding shareholder of
PayM8 (Pty) Ltd.
•
Manager of technology funds at
Real Africa Durolink Investment
Bank and Vantage Capital
•
Non-executive director of Wizzit
Payments (Pty) Ltd
•
Strong Board
Non Executive Directors
8
SABIR MUNSHI
COLIN REZEK
•
BSc (Computer Science)
•
BCom, MBA
•
Former CIO for RMB, Sanlam
Capital Markets and FirstCorp
with overall accountability for IT
strategy and execution.
•
Director and co-founder of
Vantage Capital.
•
Assisted in the establishment and
management of the Equity Africa
Fund and subsequently MMR
•
Former consultant to financial
services industry at Accenture
Strong Board
ANDREW SPRINGATE
•
CEO and co-founding
shareholder of PAYM8 (Pty) Ltd,
a mobile commerce and payment
gateway services company.
•
Former MD of Infopage (Perth).
•
Former CEO of Radiospoor
cellular division and subsequent
group COO
Non Executive Directors
9
•
A ‘Buy and Build’ strategy
•
To acquire controlling stakes or stakes with a path to obtain control, in innovative FinTech
companies who provide technology based solutions and services to existing and emerging
financial institutions and their clients
•
To ensure that the aggregated businesses can achieve greater performance as a part of
the M-FiTEC group than they would be able to achieve on their own
•
To assist group companies through the creation of market access, profile, scale and
capital for growth
•
To invest primarily into businesses where key entrepreneurs “build to operate”
•
To operate primarily in sub-Saharan Africa and in developing markets
Strong Strategy
10
FinTech is the innovative application of technology to banking, insurance and other financial
services, generally provided by independent companies. Global investment in FinTech has
grown from $1 billion in 2008 to over $12 billion in 2014.
14,000
800
12,000
700
10,000
600
Deal Volume
Investment ($M)
Figure 4: Global FinTech Financing Activity
8,000
6,000
4,000
400
300
200
2,000
0
500
100
0
2008
United States
2009
Europe
2010
2011
Asia-Pacific
2012
Other
2013
2014
Global Deal Volume
Source: Accenture and CB Insights
What is FinTech?
11
The FinTech sector is an exciting investment environment as it is a large and growing
sector experiencing considerable change occasioned by altered consumer behaviour,
revolutionary technology advances and regulatory reform
evolution
Expectation
gap closed
by FinTech
companies
time
FinTech Investment Environment
12
FinTech companies are technology companies that provide services and solutions
to the traditional and emergent financial services industry and
address a vast array of different segments including:
PAYMENTS
SOFTWARE & SERVICES
PLATFORMS
Maintenance and provisioning
of existing infrastructure like,
switches, payment gateways,
card schemes, ATMs, cash
collections, mobile payments,
wallets, remittances and stored
value coupons
Financial software including
risk management, core banking
and capital market software,
loan origination, data analytics
and advisory services, credit
reference, credit scoring,
insurance data, risk
management, fraud detection,
compliance and reporting
Peer to peer, trading platforms,
aggregators, asset and wealth
management
FinTech Segmentation
13
Online Banking
Credit, Debit & ATM
Cards
Mobile
/ Apps
FinTech
FinTech
ATM
SWIFT
MARKET PLACE
International
Transfers
Foreign Exchange
API / SERVICE LAYER
Domestic
Transfers
Savings & Deposits
FinTech
CRM
Loans & Overdrafts
Central Bank
Financial Markets
FinTech
Faster
Payments
Future
Financial
Networks
Bitcoin
Credit Risk
FinTech
Regulatory & Standards Compliance
KYC, AML & Sanctions
Dwolla
Other
blockchain
FinTech
FinTech Opportunities
BACS
CHAPS
Core Banking Engine
Insurance
In-House Product Teams
(Treasury etc)
Customer
Service
Visa / Mastercard
Anti-Fraud / eCrime
Banking Segment
14
“We expect to see more and more collaboration
between FinTech companies and financial institutions.
FinTech companies and banks will need to work
together to share talent, expertise, distribution and
traction to create viable innovation”
Mariano Belinsky, MD Santander Bank Innoventures
FinTech Opportunities
15
QUANTITATIVE FACTORS
•
Target potential return on each
investment > 25 %.
•
Established businesses with revenue and
profit history.
QUALITATIVE FACTORS
•
Opportunity to participate in platform
growth through consolidation in key target
segments.
•
Owned IP or exclusive distribution
relationships with providers.
•
Strong competitive position within the
relevant industry and geography.
•
Good revenue and profit growth potential.
•
Businesses with referenceable client
base.
•
Favourable free cash flow generation.
•
Business model with potential at scale.
•
Above industry related gross margins.
•
•
Hard currency revenue potential.
Experienced owner operators and/or
strong management team.
•
Benefits from being part of a public
company.
•
Strong culture and values fit.
•
Cross selling and synergies potential
within the M-FiTEC group.
M-FiTEC Acquisition Criteria
16
R1 billion +
Private
Equity
R200 m
M-FiTEC
International
R20 m
Start-ups
0
Private FinTech Companies
17
PROJECT
DESCRIPTION
INDICATIVE EV
R000's
A
Provides identity management solution to banks
240 000
B
Provides loan origination and management software as a service
25 000
C
Offers a payment clearing and settlement system
50 000
D
Offers a comprehensive core banking application suite
220 000
E
Provides a POS switching and communication platform
60 000
F
Offers a comprehensive application suite for insurers and intermediaries
80 000
G
Provides secure transaction services to banks and other financial institutions
H
Offers an interoperable mobile wallet platform
18 000
I
Develops bespoke solutions using latest tech innovations for financial institutions
60 000
J
Offers a platform for mobile payments to integrate into banks core systems
60 000
X
Provides an outsourced consumer credit finance platform
Y
Branchless financial institution offering p2p payments
Z
Provides solution to banks, supporting card issuing, ATM acquiring and POS acquiring.
545 000
3 000 000
600 000
2 800 000
Strong Pipeline
18
In accordance with the JSE Listings Requirements, M-FiTEC may not exceed the estimated
operating expenses without a 75 % majority shareholders approval.
The estimated costs that will be incurred by M-FiTEC for the two year initial period ending
31 October 2017 are;
Mar-16
5 months
Pre listing costs
1 180 000
Listing costs
6 120 000
Mar-17
12 months
Transaction costs on acquisition of viable asset
Oct-17
7 months
2 500 000
Operating costs
3 730 000
8 928 000
5 332 000
TOTAL COSTS
11 030 000
8 928 000
7 832 000
Costs
Expected Listing, Transaction and Operating
19
Issuer:
Subscription price:
M-FiTEC International Limited
R10 per M-FiTEC ordinary share
Subscription size:
Unlimited (but subject to Board approval)
Minimum subscription consideration:
R500 000 (50 000 ordinary shares) – individuals
R5 000 000 (500 000 ordinary shares) - institutions
Listing:
Public listing on the AltX
Shares:
Ordinary shares of no par value
Directors’ ordinary share:
Directors’ deferred share:
At least 5 % of the issued share capital (max R18 million)
1 deferred share for every ordinary share, convertible on completion of
successful acquisition of Viable Assets (maximum dilution of 4.762 %)
Proceeds in Escrow:
Proceeds to be held in Escrow until either an acquisition of Viable Assets
or expiry date
Timing:
•
•
Cash deposited into Escrow: by 16 October 2015
Anticipated issue of shares and listing date: 27 October 2015
Details of the Private Placement
20
At the moment, FinTech innovation is a ‘white hot’ space. Established and emerging players
are transforming the industry, increasingly designing products and services
around the evolving behaviours and need of customers and clients.
One of the key accelerants driving this is the open innovation between
large scale commercial entities and FinTech companies
Derek White, Chief Design and Digital Officer, Barclays Bank.
Strong
Board
Strong
Strategy
Strong
Pipeline
Conclusion
21
A
Vision
B
Benefits of a SPAC to investors
C
Benefits of SPAC to targets
D
Expected Listing and Transaction Costs
E
Expected Operating Costs
F
FinTech Investment Further information
Appendices
22
•
To raise up to an initial R360 million and list as a SPAC on the AltX
•
To build a developing markets Financial Technology (“FinTech”) group with revenue
targets of R1 billion within 2 years, $1billion within ten years and a minimum EBITDA
margin target of 10 % on revenue
•
To become a consolidator of excellent companies which meet a strict set of criteria in the
FinTech segment
•
To create shareholder value both through capital appreciation and the payment of annual
dividends
•
Ambitions to raise capital on the AIM market to enable future International expansion
•
To attract and retain entrepreneurial, innovative and good staff through an effective
M-FiTEC management style and incentive driven remuneration policies and benefits,
including a group share scheme
Vision
A
23
•
Innovative approach to Private Equity. Most efficient and cost effective method to
raise capital and list on the JSE
•
Liquidity of shares in a Private Equity investment. No ten year lock in
•
Alignment of interests between Directors and Investors through direct investment of
5 % of capital and lock ups and transfer restrictions on Directors’ shares
•
Unique downside protections to investors in a publicly listed asset
- Cannot spend more than budgeted without shareholder approval
- Shareholder vote required on acquisitions
•
If unable to conclude acquisitions within two years post listing then cash plus interest less
expenses to be repatriated to shareholders via Escrow redemption
•
Investors acquire net cash with a valuable embedded real option with expiry in
24 months for free
Benefits of a SPAC to Investors
B
24
•
Enhanced settlement flexibility for exiting investors versus traditional IPO or trade sale
•
Minimal operational disruption to business and employees for exiting investors
•
Minimal disruption for entrepreneurially led companies
•
Directors stamp of approval on opportunities
•
Potential for group synergies to be explored versus imposed via trade sale
•
Theoretically no upper limit on transaction size
•
Potential for sellers to retain significant equity stakes in Holdco
•
Can structure complex transactions to meet sellers unique needs
•
No defined exit horizon or exit strategy – (build to operate not built to flip)
Benefits of a SPAC to Potential Targets
C
25
The estimated listing costs that will be incurred by the company for the period ending 31 March 2016 and estimated
transaction costs for the acquisition of Viable Assets for the period ended October 2017
Pre-listing, listing and transaction costs
Pre-listing costs
Corporate and Designated Adviser fee
Tax specialists
Directors’ fees
Other
Listing costs
Corporate and Designated Adviser fee
Capital raising fee (including Escrow)
Legal fees
JSE documentation fee
JSE listing fee
Transfer Secretaries, Strate and Exchange Control fees
Other
Printing, publication and distribution and contingency
Contingency
Transaction costs on acquisition of Viable Asset
Total pre-listing, listing and transaction costs
Mar - 2016
5 Months
R’000
Mar - 2017
12 Months
R’000
Oct - 2017
7 Months
R’000
1 180
90
90
750
250
6 120
1 000
4 000
350
60
30
50
300
200
130
-
-
-
-
2 500
7 300
-
2 500
Expected Listing & Transaction Costs
D
26
The estimated operating costs that will be incurred by the company for the periods ending 31 March 2016, 31 March 2017
and 31 October 2017 are as follows:
Mar - 2016
5 Months
R’000
75
Mar - 2017
12 Months
R’000
180
Oct - 2017
7 Months
R’000
126
Professional advisers
210
480
294
Rent, utilities and infrastructure
100
240
154
2 500
6 000
3 500
Employee salaries
625
1 500
950
Travel
100
240
140
Other
120
288
168
3 730
8 928
5 332
11 030
8 928
7 832
7 500
18 000
10 500
(3 530)
5 542
10 710
Operating costs as a % of capital raised
2.49%
2.48%
2.54%
Total costs as a % of capital raised
7.35%
2.48%
3.73%
Operating costs
Designated Adviser fee
Directors’ fees
Total operating costs
Total costs for the period (including listing and transaction)
Interest earned on R360 million at 5 % (simple for 2 years)
Cumulative gain if no transaction concluded
Expected Operating Costs
E
27
• “The Future of FinTech and Banking Accenture 2015
• World Economic Forum The Future of Financial Services June 2015
• World Payments Report 2014 Cap Gemini
• World Retail Banking Report 2015 Cap Gemini
• The Future of Payments Ovum
• State of the Industry Mobile Financial Services Report 2014 GSM Association
• THE INSIDER’S VIEW TO PAYMENTS AND FINTECH Payments Innovation
Jury Report 2015
FinTech Investment Further Information
F
28
All information contained in this document is strictly confidential. This document is
not for general or public dissemination or discussion and does not constitute an
offer to the public. All confidential information made available to, or obtained by,
any of the parties in connection with the surveys and analysis undertaken as part
of this transaction, or as a result of the implementation of this investigation, of any
documents pursuant hereto which are not a matter of public knowledge or lawfully
available from any other source, shall be and remain confidential between the
parties during the term of this project and its related investigations. The parties
shall take, or cause to be taken, all such reasonable precautions as may be
necessary to prevent the disclosure of any information and data made available to
them in relation to this project. Additionally, the parties agree to effect similar
confidentiality undertakings in writing from any staff personnel who shall in the
future be involved, or any additional personnel who may become involved at any
future date.
Disclaimer
29
Corporate Adviser
For more information:
011 325 6363
Marcel Goncalves
marcel@merchantec.co.za
Rick Irving
rick@merchantec.co.za
Strong
Board
Strong
Strategy
Augusta House, Inanda Greens Office Park
54 Wierda Road, Wierda Valley, Sandton
(P.O. Box 786521, Sandton, 2146)
Strong
Pipeline