Pepkor Holdings Limited (PPH) investor relations material

Deal rationale and strategic fit

• Combines two leading fintech and merchant commerce platforms to create South Africa's preeminent merchant commerce and fintech platform, serving both formal and informal markets with annual throughput exceeding R200 billion.

• Leverages complementary strengths in payments, digital products, and business management, supporting merchants transitioning to digital models while maintaining accessibility for cash-based transactions.

• Deepens customer and merchant engagement across a retail-powered platform with 32 million known customers, expanding reach across the informal market value chain.

• Lays the foundation for a retail-powered consumer platform beyond formal markets, aiming for significant medium-term value creation and future listing.

• Builds on a longstanding commercial relationship, unlocking shareholder value and supporting a broader retail and financial services strategy.

Financial terms and conditions

• Flash valued at ZAR 10.6 billion and Shop2Shop at ZAR 10.7 billion, resulting in a combined valuation of ZAR 21.3 billion.

• Pepkor will acquire a 57.1% controlling stake in the new entity (FintechCo) via a ZAR 1.57 billion cash investment, with Shop2Shop shareholders retaining 42.9%.

• The transaction is classified as a Category 2 transaction by the JSE and is initially dilutive for Pepkor in year one but becomes accretive from year two due to high EBITDA growth rates.

• Shop2Shop's new share subscription proceeds will be used to settle its debt and other obligations.

• IRR expected above 30% base case, and above 40% including synergies, the highest among recent acquisitions.

Synergies and expected cost savings

• Significant operational and strategic synergies expected from cross-selling, expanded product offerings, and leveraging combined distribution footprints.

• Integration will enable traders to access a broader suite of services, driving higher earnings without proportional cost increases.

• Synergies are expected to be fully realized in the second year post-integration.

• Value creation opportunities identified through integration of systems, data, and people.

• Integrates Shop2Shop’s merchant and payment network with Flash’s VAS and digital product capabilities for greater scale and relevance.