Payments, Aviation And Mining Lead The Deal Agenda

South Africa’s most closely watched deals span very different sectors, but the value being pursued has a common source. Pepkor and Capitec are expanding their reach into payment flows, Harith Aviation is seeking control of the country’s largest domestic airline, and Anglo American is advancing the sale of its 85% interest in De Beers.

These transactions centre on businesses with established customer relationships, licences, infrastructure, distribution and operating scale. Such positions are difficult to recreate, but acquiring them does not always give the buyer unrestricted control over how they are used.

Pepkor’s proposed combination of Flash and Shop2Shop is one of the most significant recent moves in South African fintech. Pepkor will subscribe R1.57 billion in cash for new Shop2Shop shares and contribute its entire interest in Flash, valued at R10.6 billion. It will hold 57.1% of the combined business, FintechCo, which has an implied equity valuation of approximately R21.3 billion.

Flash distributes value-added services and digital products, while Shop2Shop provides acquiring, payments, cash-management and trade services to merchants. Pepkor says the combined platform will serve the formal and informal economies, with annual transaction throughput exceeding R200 billion.

The combination gives Pepkor a financial and merchant-services layer across the retail reach it has already built. It also creates a route to a planned separate listing of FintechCo in the medium term, subject to the transaction first receiving the necessary regulatory and competition approvals.

The deal raises a wider question for South African retailers. Are payment platforms extensions of their existing retail operations, or are they becoming infrastructure businesses with their own investment case and a potentially higher value outside the groups in which they developed?

Capitec’s proposed acquisition of Walletdoc for up to R400 million points to the same contest for payment infrastructure, although at a smaller scale. The consideration comprises R300 million in cash and a deferred earn-out of up to R100 million over three years, linked to performance milestones and the Capitec share price.

Walletdoc provides payment gateway, payment orchestration and merchant-acceptance services. The acquisition would place Capitec on both sides of part of the payments market. The bank owns Capitec Pay and would also own a payment service provider competing for merchant business.

The Competition Commission has recommended that the Competition Tribunal approve the transaction subject to conditions. The Tribunal has not yet approved the acquisition.

The proposed conditions would require the merged business to make Capitec Pay available to third-party payment service providers capable of integrating with it. Confidential business information obtained from competing providers through their access to Capitec Pay could not be used against them. Capitec would also have to treat PayShap Request and the Rapid Payments Programme rail no less favourably than Capitec Pay, unless objectively verifiable and proportionate differences justify different treatment.

This is more than a competition-law qualification. The conditions affect how Capitec could use the asset it is buying. Integration may increase transaction volumes and deepen merchant relationships, but ownership would not allow Capitec to close the platform to competitors or favour its own payment product without justification.

Harith Aviation’s proposed acquisition of Safair Holdings brings a different issue into focus. The Competition Commission recommended conditional approval in July. The Competition Tribunal heard the transaction on 17 August, including objections from CemAir, but has not yet issued its final decision.

Safair Holdings owns Safair Operations, which operates FlySafair. The proposed transaction would transfer control from Ireland-based ASL Aviation Holdings to Harith Aviation, a special-purpose vehicle jointly controlled by Pan-African Infrastructure Development Fund 2 SA and Harith InfraCo.

Harith InfraCo is part of the consortium that owns Lanseria International Airport, where FlySafair operates. The proposed acquisition would connect an airline with interests in airport infrastructure used by competing carriers.

The Commission’s proposed conditions address the exchange of information and require airline-related and airport-related goods or services supplied to other airlines at Lanseria not to be offered on unfair, unreasonable or discriminatory terms.

Routes, operating capacity, regulatory approvals and airport access contribute materially to the value of an airline. An ownership link with airport infrastructure may strengthen that position, but it also creates the risk that competing airlines receive less favourable access, pricing or service. The regulatory conditions are aimed at preserving the transaction while limiting that risk.

The harder question is whether behavioural conditions can fully separate the commercial incentives of businesses connected through the same ownership structure. That issue extends beyond aviation and is likely to surface more often as infrastructure investors expand across different parts of the same value chain.

The De Beers sale presents a different valuation challenge. Anglo American owns 85% of the business, with the Government of Botswana holding the remaining 15%. Anglo confirmed in its July interim results that it was advancing the formal sale process while reducing costs and capital expenditure in response to difficult diamond-market conditions.

Anglo American chief executive Duncan Wanblad said in media interviews at the end of July that more than one bidder was involved and that no party had been granted exclusivity at that stage. No preferred bidder or agreed transaction has been announced.

A buyer would acquire the De Beers brand, mining operations in Botswana, South Africa, Namibia and Canada, established distribution and longstanding relationships with producer governments. It would also acquire a business facing weaker natural-diamond demand and growing competition from laboratory-grown diamonds.

The timing creates an unusual tension. Current performance may support a lower valuation, while the scarcity and long life of the underlying assets support a longer-term view. The outcome will show whether bidders are prepared to look through the present diamond cycle and how much weight they place on government participation in the future ownership of the business.

Energy is also becoming part of how mining assets are valued in South Africa. Mining groups are investing in renewable generation and entering long-term supply arrangements to reduce costs and improve security of supply. A buyer assessing a mining operation must understand the power arrangements supporting it, how long they will last and whether their benefits can be transferred with the asset.

Grid access creates similar valuation differences in renewable-energy transactions. Projects with comparable generation potential can carry very different risk where one has secured grid capacity and contracted revenue while another still faces uncertainty over connection timing. Development potential does not command the same value as operating certainty.

International deal activity supports this broader pattern. Electronic Arts completed its US$55 billion take-private on 4 August. Prologis reached agreement with SEGRO’s board on a recommended acquisition valued at up to £14.3 billion, and Apollo agreed to acquire easyJet in a transaction valuing the airline at approximately £5.7 billion. The SEGRO and easyJet transactions have been agreed but have not yet completed. Silver Lake has reportedly held discussions about acquiring Workday, although no agreement has been announced.

These transactions also concentrate capital in businesses with established customers, intellectual property, logistics infrastructure, routes and systems embedded in their clients’ operations. The global scale is different, but the investment logic is familiar.

Buyers are paying a premium for access, but access and control are not the same thing. A transaction may secure the platform, licence, infrastructure or market position the buyer wants while leaving less freedom to use it than the valuation assumed. The deal will ultimately be judged by how much of that strategic advantage survives the approval process and the realities of integration.