Bank Zero snapped up for R1.1 billion

The acquisition consideration will be settled through a combination of newly issued shares and up to R91 million in cash.

As a result, the shareholders of Bank Zero will own approximately 12% of Lesaka’s diluted shares at the time of completion of the proposed transaction. The proposed transaction is subject to the satisfaction of customary closing conditions as well as regulatory approvals  ordinarily required of a transaction of this nature. This includes approval from the Prudential Authority, a division of the South  African Reserve Bank, Competition Commission approval and Exchange Control approval.  

The transaction was first announced by Bank Zero chairman Michael Jordaan in a social media post, where he said that the leadership team of the bank will remain fully intact. Bank Zero was founded seven years ago by Jordaan, banking innovator Yatin Narsai, and five other co-founders. It is 45% black-owned and 20% women-owned. The mutual bank, registered with the South African Reserve Bank in 2018 and launched in 2021, offers low rates for personal and business banking.

Bank Zero uses IBM Z mainframe computers and LinuxONE as a secure platform that can protect against data breaches with IBM’s Secure Service Container. It has no physical bank branches and operates as a fully digital bank through its mobile app, available on both Android and iOS. Bank Zero has recorded deposits of roughly R400 million. For the year ending December 2024, card spending totalled R415 million across its customer base.

“We’re now tracking ahead of plan with expected break-even by 2027. Our challenge is to try and get there much sooner,” it said.

The bank reported that deposits, card purchases, and electronic fund transfers are increasing continuously, with year-on-year growth exceeding 50%.

Lesaka said that the transaction marks another key milestone in Lesaka’s journey to build a vertically integrated fintech platform. The acquisition will also give the company Bank Zero’s digital banking infrastructure and its operational banking license. This, together with Lesaka’s fintech and distribution platform, is intended to transform the way it is able to conduct business in the future, offering key  financial, strategic and regulatory benefits, including.

Lesaka expects the transaction to support a more optimised balance sheet in the future, allowing the group to finance the existing and continued growth in lending books through customer deposits, driving stronger lending unit economics. In  addition, the reduction in the use of bank debt in the group’s Consumer and Merchant Divisions will assist in a deleveraging  of Lesaka’s gross debt. Post completion, and subject to regulatory approval, Lesaka could achieve more than R1 billion reduction in gross debt.  

Upon completion of the proposed transaction, the selling shareholders of Bank Zero, which include Michael Jordaan, CEO Yatin Narsai, and other key members of the bank, will collectively hold an approximate 12% stake in Lesaka. Bank Zero sellers will be subject to regulatory and contractual lockups ranging from  between 18 and 36-months post-completion, depending on the seller. Following completion of the transaction, Jordaan will join the Lesaka Board of Directors, while Narsai will continue as CEO of Bank Zero. The broader Bank Zero leadership team will remain in their current roles, ensuring continuity and integration.