Retail giant Pepkor has announced plans to merge its Flash business with merchant-focused fintech platform Shop2Shop, creating one of South Africa's largest fintech companies with an estimated equity value of R21.3 billion.
The proposed transaction will combine Flash, Pepkor's value-added services (VAS) distribution network and digital products platform, with Shop2Shop, which provides merchants with payment, acquiring, cash management and trade enablement services.
Pepkor said the two businesses have a long-standing commercial relationship and that the merger will strengthen their presence across South Africa's informal economy by expanding services to merchants and consumers while unlocking operational and strategic synergies.
As part of the transaction, Pepkor will acquire a 57.1% stake in the newly formed FintechCo. The retailer will invest R1.57 billion in cash through a subscription for new Shop2Shop shares and contribute its entire shareholding in Flash, valued at R10.6 billion.
Once the transaction is finalised, Pepkor will own 57.1% of FintechCo, while existing Shop2Shop shareholders will retain the remaining 42.9%.
Pepkor said the deal aligns with its strategy to accelerate growth in its Informal Market Platform segment and supports its long-term goal of creating greater value for shareholders through a planned separate listing of FintechCo in the medium term.
The company said the combined business will strengthen its retail-powered consumer platform, which serves more than 32 million known customers, by increasing engagement with both merchants and consumers and expanding participation in everyday commerce.
The merged platform will also combine Shop2Shop's merchant payment and trade capabilities with Flash's digital products and value-added services, creating a more comprehensive fintech offering with greater scale and market reach.
Shop2Shop founder Peter Berry said the merger represents an important milestone for the business.
"Shop2Shop was founded to provide purpose-built solutions to South Africa's large and underserved informal merchant market, empowering small business owners. We've built a broad product offering on a platform designed for high-volume, low-cost transactions. By joining forces with Flash, we can expand our offering, grow our scale and further strengthen a proven South African fintech platform," Berry said.
Pepkor also disclosed that Chief Executive Officer Pieter Erasmus holds an indirect minority interest in Shop2Shop through an associated company, an investment that predates his appointment as the group's CEO.
Following the completion of the transaction, companies associated with Berry and Erasmus are expected to hold minority stakes of 24% and 13.2% respectively in FintechCo, with the remaining shares owned by Shop2Shop group employees.