Absa has announced an agreement with Edcon to acquire the accounts and receivables relating to the private label store cards of Edcon in South Africa, including the Edgars, Jet and Boardmans brands.
Absa and Edcon have further agreed to enter into a long-term, strategic relationship under which Absa will provide retail credit to Edcon customers.
This landmark deal, with an indicative value of approximately R10 billion, sees the bank significantly increasing its net card receivables and more than doubling its number of active cards in the market.
In terms of the strategic relationship, Absa will have responsibility for credit, management of fraud, risk, finance, legal and compliance operations of the store card business, while Edcon will retain all customer facing activities, including sales and marketing, customer services and collections. The transaction leverages the competencies of both parties while ensuring a seamless customer experience. Edcon and Absa will balance continued growth of the credit book with appropriate credit quality.
Absa Group and Barclays Africa Chief Executive Maria Ramos described the agreement with Edcon as a major milestone for both organisations.
‚This is a significant addition to our retail finance offering. Unsecured lending is a key market for Absa to channel capital into under-served communities, while adhering to responsible lending practices in the best interests of our customers and the bank. Our relationship with Edcon significantly strengthens our presence in this space,‚ said Ramos.
The acquisition is in line with Absa’s strategy to increase its proportion of the unsecured lending market.
Ramos said: ‚The two brands have a number of shared values which will allow us to leverage each other’s unique strengths. Apart from allowing Absa to further extend its footprint in financial services, we will be building a strategic relationship with one of South Africa’s leading retailers.‚
Completion of the acquisition is subject to regulatory approval and other customary conditions and the transaction is expected to come into force in the second half of 2012.
* Follow Gadget on Twitter on @gadgetza