Berlin, Düsseldorf The Swedish financial investor EQT is about to join Germany’s largest credit agency, Schufa. The investor is acquiring a stake of almost ten percent from the major French bank Société Générale at a valuation of more than two billion euros, as the Handelsblatt learned from financial circles. An exclusive agreement has been made for this purpose.
In a further step, EQT wants to buy shares from other Schufa shareholders and, in the best case, increase them to a majority in the company. The Swedes are already holding talks with representatives of Deutsche Bank, Commerzbank and other companies from the group of owners who also want to sell their shares.
The shares of the Wiesbaden credit agency are widely diversified. According to their website, the owners include credit banks as well as savings banks, cooperative banks and retail companies. The credit banks hold the largest share at around 35 percent. This is followed by the savings banks with around 26 percent and the private banks with just under 18 percent. The Schufa does not give more precise information. The credit agency does not say how it distinguishes between credit and private banks.
With an annual turnover of more than 200 million euros and an operating margin of almost a third, Schufa is highly profitable. However, the company is not part of the core business of most shareholders, which is why they put their stake up for sale.
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EQT and Schufa did not comment on the deal in response to a Handelsblatt request. The board of the credit agency was informed about the change in the group of shareholders on Thursday.
The offer to the shareholders is attractive: The valuation for Schufa in the EQT transaction is at least two billion euros, as it was called in financial circles. That’s more than thirty times operating profit. The participants justify the assessment with the potential of the company.
How EQT wants to rebuild the Schufa
Other financial investors were also interested in a Schufa participation. The Bloomberg news agency reported in March that US investor Hellman & Friedman, among others, was holding talks. A complete sale was therefore also up for discussion. EQT has now taken the first step with the acquisition of the shares in Société Générale.
The core business of credit agencies like Schufa is to evaluate people’s creditworthiness. They sell their information to companies and private individuals – such as banks, landlords or mobile phone providers.
If a consumer wants to take out a loan, rent an apartment or buy a smartphone with a contract, the credit bureaus provide their customers with a so-called score value within a few seconds. At Schufa, it is between zero and 100. The lower the value, the worse it assesses the consumer’s creditworthiness.
The credit bureau provides an average of 490,000 pieces of information to other companies every day, according to the credit agency’s website. Your database now includes more than a billion pieces of information on 68 million people and six million companies.
This makes Schufa, which employs 900 people at six locations, the largest German credit agency. Well-known competitors include Crif Bürgel, Creditreform Boniversum and Infoscore Consumer Data. Fintechs like Bonify are also involved in the market.
From the perspective of the financial investor EQT, the business of Schufa can be expanded significantly. The Swedes plan to expand the company through acquisitions in Europe and thus strengthen it. The creditworthiness business of companies themselves could also be expanded.
For this, however, the Schufa would have to invest. The previous owners are likely to have little interest in this, as they only wanted to collect the dividend from the company’s profits. That’s why EQT has agreed to expand the business with its own money, a person familiar with the deal told Handelsblatt.
Is the Schufa becoming more transparent?
The financial investor dares to venture into a delicate field. The Schufa is regarded by consumer advocates as a data octopus who is crazy about collecting. To determine a customer’s score, she combines name, date of birth and address with information on bank accounts, credit cards and installment loans. It also collects data from cellular and mail order accounts.
A pilot project with the cell phone provider Telefónica / O2 recently attracted criticism. The idea: First of all, allow rejected customers to sign a contract – provided that they give Schufa a detailed look at their account in order to be able to derive a possibly better rating. Data protectionists ran storm, the Schufa wants to revise the project.
The credit agency does not reveal how it creates score values from its previous database. For this, too, she has long been criticized. In 2014, however, the Federal Court of Justice confirmed that the credit agency does not have to disclose its methods – although consumers keep wondering how their rating came about.
EQT wants to rectify this flaw, as a person familiar with the transaction said. Representatives of the financial investor had already spoken to politicians and consumer advocates about their concerns in advance of the participation.
On this basis, the Swedes worked out proposals as to what should work better in the future. EQT wants to give a better overview of which data the Schufa stores and how they contribute to the assessment of creditworthiness. “Full transparency” is necessary for this, it said. A closer involvement of consumer advocates is also planned.
EQT wants to address concerns that may arise with the announcement of the participation, said a person familiar with the transaction. Because if a credit agency, which already manages a billion intimate data of the Germans, expands its business under the ownership of a financial investor, this could fuel concerns about data protection.
EQT representatives therefore assured prophylactically that the data would remain safe. A storage of data sets outside of Europe will not exist, it said from the ranks of the investor. As a Swedish company, EQT is committed to values such as transparency.
More on the subject: How to submit an application for self-disclosure to the Schufa