NEW dream team
Woolworths' 169000 Visa credit card holders along with its 1,6million in-store card holders are to be half-owned by Absa.
Yesterday's announcement confirmed speculation following December's cautionary announcement that the upmarket food and clothes retail chain planned to ally itself with middle-income bank Absa.
An obstacle to this marriage was seen as Absa's close relationship with another retail chain, Shoprite.
Doug Walker, Absa's card division managing executive, said: "This is primarily a Barclaycard deal. Barclaycard will not enter co-branding agreements with other retailers in this region besides Woolworths. But Absa remains free to make other alliances."
Woolworths' proposed tie-up with Absa requires a divorce from Mercantile, which currently provides the banking licence for Woolworths branded credit cards.
Simon Susman, chief executive of Woolworths, said these cards would be migrated from Mercantile to Absa after the deal had competition authority approval. Mercantile will continue to manage Woolworths credit cards for the next six months or so until the retailer's joint venture with Absa is finalised.
"Our Mercantile-backed card is not strong in the top end of the market. Most of our credit card holders are middle income people. An advantage of this deal is that we can offer Woolworths-Barclaycard co-branded cards to premium customers," Susman said.
The deal will see Absa pay R875million for 50percent plus one share of Woolworths Financial Services.
Richard Inskip, who negotiated the deal with Absa, resigned as a Woolworths director yesterday but remains a Woolworths Financial Services nonexecutive director.
A danger of a marriage between a retailer and a bank is that one may try to steal the other's customers. However, Susman said Woolworths card holders would deal with Woolworths Financial Services and not with Absa directly.
Walker said the alliance with Woolworths would help Absa broaden from its middle-income customer base to higher net-worth individuals.
Walker said no jobs would be lost through the joint venture. "We plan to grow Woolworths Financial Services," he said.