Unlisted retail banking group African Bank will acquire 100% of Grindrod Financial Holdings Limited (GFH) and 100% of the preference shares issued by Grindrod Bank – the commercial and industrial property finance divisions of JSE-listed freight group Grindrod Limited.

The R1.5 billion deal, announced on Sens on Thursday, is expected to accelerate African Bank’s entry into South Africa’s business banking sector.

Of the R1.5 billion total cash consideration, R285 million is payable to Grindrod for the disposal of Grindrod Bank’s issued preference share capital, with the balance for the disposal of GFH’s issued ordinary share capital.

The deal, which is yet to be finalised, is still subject to regulatory approvals including from the Prudential Authority, National Credit Regulator, the Competition Authorities and the minister of finance.

“African Bank’s strategy is to build a sustainable diversified offering across the consumer and business banking segments. Grindrod Bank will provide an entry into the business banking market which will be grown off African Bank’s larger balance sheet and additional allocation of capital,” say the Sens announcement.

Grindrod’s share price surged more than 13% (to around R7.72 a share) in afternoon trade on the JSE on Thursday, following news of the disposal.

The deal follows African Bank’s appointment of Zwelibanzi Manyathi as group executive of business banking on December 13, 2021. The new role, under Manyathi’s leadership, intends to establish a business banking division that will offer asset financing and mortgage origination solutions.

“We announced earlier this year the formation of our business banking division as part of a strategy to diversify and develop a fully-fledged middle-of-the-pyramid business banking offering,” says Kennedy Bungane, CEO of African Bank.

Grindrod Bank was established 26 years ago and specialises in managing cash deposits, corporate lending and providing tailored financial services to private, corporate and institutional clients.

Strategic alignment

Grindrod Bank CEO David Polkinghorne, says the bank has had several suitors over the years, however, its alignment with African Bank is favourable from a strategic and client perspective.

In its Sens, Grindrod says the proposed transaction is in line with its strategic intent to separate its Freight Services and Banking Services businesses and following the deal’s conclusion it will focus on its growth strategy within the Freight Services business.

The two parties do not foresee any fundamental changes to their structures.

The acquisition comes after African Bank released its half-year results to the end of March 31, reporting a net profit after tax of R257 million – a significant improvement from the prior comparative period when the company reported a R135 million loss.