MICROCAPITAL STORY: Pan-African Microfinance Institution Blue Financial Services (BFS) to Acquire South African Microlender Credit U Holdings for $36m

African commercial microlender Blue Financial Services (BFS) has announced plans to purchase the entire issued share capital of South African microlender Credit U Holdings for the price of RND 278 million (USD 36 million). The purchase will consist of a 50 percent cash and 50 percent share offer to all Credit U shareholders, at a ratio of one BFS share for every 2.25 Credit U shares. Both companies’ shares are traded on the Johannesburg Securities Exchange.

BFS’ CEO Dave Van Niekerk said that the company sought the acquisition in an effort to consolidate and expand outreach of BFS’ South African operations. The acquisition of Credit U’s 92 branch offices will increase BFS’ South African branch network to 170 offices.

According to Niekerk, Credit U’s management and staff will be retained following the acquisition, and where duplications exist, staff will be redeployed. Credit-U’s board members will not transfer across, relinquishing their directorships.

With BFS’ offer accepted by Credit U, the deal now awaits legal approval by South Africa’s Competition Commission. If the acquisition is approved, Credit U will be delisted from the Johannesburg Stock Exchange.

BFS has made several recent headlines on MicroCapital for its continued expansion of services and new partnerships. In June 2008, MicroCapital reported that private equity group Emerging Capital Partners joined BFS’ with a USD 15 million equity stake in the firm. In March 2008, BFS partnered with Nigeria’s Intercontinental Bank to launch a USD 25.9 million commercial microfinance bank in Nigeria. In September 2007, BFS partnered with World Bank unit International Finance Corporation in Botswana to launch a program that integrates HIV awareness programs with microlending services.

Founded in 2001, Blue Financial Services is a commercial microfinance institution seeking to provide financial services to the “formally employed lower-income Africans [that can] only access rudimentary banking services, and [are] often seen as unbankable by the mainstream financial service institutions.” Beginning operations in South Africa, Blue has steadily expanded its reach to 12 African countries, most recently commencing operations in Swaziland according to a July MicroCapital report. As of February 2008, BFS reported total assets of RND 1.1 billion (USD 147 million), a gross loan portfolio of RND 482 million (USD 64.4 million), a debt-equity ratio of 77 percent, and return on assets of 7.6 percent. Rating information is not available.

Established in 2002, Credit U Holdings is a commercial, non-bank financial institution that provides microloans and microinsurance to the “medium and lower income strata of South Africa’s population”. Its 2007 financial statements report total assets of RND 182.5 million (USD 23.6 million) and a gross loan portfolio of RND 146 million (USD 18.9 million). Calculated from its financial statements, Credit U Ltd had a debt-equity ratio of 68.63 percent, and return on assets of 24 percent. Rating information on Credit U is not available.

By Ryan Benson, Research Assistant

Additional Resources:

MicroCapital Story: Private Equity Group Emerging Capital Partners (ECP) Invests $15m in Microfinance Institution (MFI) Blue Financial Services (BFS)

MicroCapital Story: South African Microfinance Institution (MFI) Blue Financial Services and Nigeria’s Intercontinental Bank to Launch $25.9m Microfinance Bank

MicroCapital Story: International Finance Corporation (IFC) and Blue Financial Services Group to Integrate HIV/AIDS Prevention with Microfinance

MicroCapital Story: South African Microfinance Institution Blue Financial Services (BFS) Begins Operations in Swaziland

IT Web: Blue makes bid for listed micro-lender

Blue Financial Services: Press Release – BLUE FINANCIAL SERVICES TO ACQUIRE LISTED MICRO LENDER CREDIT U IN A R278 MILLION DEAL

Blue Financial Services: 2007 Annual Report

MIX Market: Credit U Profile

Credit U: Home

Blue Financial Services: Home