Net 1 UEPS Technologies, Inc. (NasdaqGS: UEPS; JSE: NT1) (“Net1” or
the “Company”) today announced that it has completed its
acquisition of the Connect Group in South Africa, for ZAR 3.8
billion, or approximately $264 million at an exchange rate of $1:
ZAR 14.52. The acquisition of the Connect Group, a profitable,
high-growth and leading South African fintech company, is
transformational for Net1 in its journey to become South Africa’s
leading fintech platform.
Quote from Chris Meyer, Net1 Group
CEO
“We welcome this landmark acquisition, which
officially kickstarts our transformational journey of building a
unique fintech platform, that will offer payment processing and
financial services to both consumers (B2C) and merchants (B2B),
across the formal and informal sector. This ground-breaking deal
strongly supports our shared mission to serve a burgeoning informal
sector by providing financial inclusion, while simultaneously
positioning the Company to benefit from secular tailwinds and
multiple growth opportunities. Now that the acquisition is
completed, we are looking forward to integrating the two companies
and unlocking value for all our stakeholders. We are thrilled that
the Connect Group CEO Steve Heilbron, with over two decades of
financial services experience, will join the Net1 board with
immediate effect and take up responsibility for spearheading our
combined Merchant offering for the next year,” said Chris Meyer,
Group CEO of Net1.
Quote from Steven Heilbron, Connect
Group CEO
“Connect Group is incredibly proud to be to be part of a
transformative company, formed out of one of the largest fintech
acquisitions seen in South Africa to date. We are looking forward
to offering even more compelling cash management solutions, value
added services, business funding and card acquiring solutions to
South African retail merchants, including offering desperately
needed financial services to hundreds of thousands of informal
small merchants that have to date been largely overlooked. We will
leverage this opportunity to focus on extending our existing
merchant network and quickly grow our footprint across the country.
We look forward to being part of a game-changing strategy that puts
us at the cutting edge, offering fintech solutions for underserved
merchants in the informal market as well as for small and medium
merchants in the formal sector,” said Steven Heilbron, Connect
Group CEO.
Strategic Rationale
The acquisition of the Connect Group
significantly advances Net1’s vision and is truly transformational
for the Company. The acquisition adds significant scale to Net1’s
B2B offering, bringing 44,000 micro, small and medium enterprises
into the Merchant business segment. We expect the complementary
product offerings to create significant growth opportunities by
enabling the Group to address the needs of approximately 1.4
million informal and approximately 700,000 formal micro, small and
medium enterprises in South Africa.
The Connect Group has demonstrated its ability
to deliver excellent growth and profitability through its
innovative solutions for micro, small and medium enterprises across
South Africa, and its combination with Net1’s existing B2B
operations creates a business with significant scale across all
tiers.
Funding
The transaction consideration of ZAR 3.839
billion ($264 million) was funded through existing cash resources
of ZAR 2.139 billion ($147 million), upsized net debt facilities of
ZAR 1.350 billion ($93 million) and deferred equity consideration
of ZAR 350 million ($24 million), consisting of approximately 3.2
million shares of Net1 common stock, to be delivered over a
three-year period.
The upsized net debt facilities of ZAR 1.350
billion ($93 million) comprises (i) ZAR 1.100 billion ($76 million)
in 18-month bridge facilities obtained by Net1 and secured against
its assets and (ii) an effective increase in Connect Group
facilities of ZAR 0.250 billion ($17 million).
At closing, the leverage ratio on the ZAR 1.361
billion ($94 million) of debt in the Connect Group, is expected to
be less than 3.6x the expected EBITDA for the financial year ended
February 28, 2022. The asset cover ratio on the ZAR 1.100 billion
($76 million) bridge facilities for Net1 is expected to be greater
than 7x as measured against the fair value of Net1’s assets based
on its June 30, 2021, balance sheet.
About the Connect Group
Founded in 2006, the Connect Group is a
profitable, high-growth and leading provider of financial
technology solutions to nearly 44,000 micro, small and medium
enterprises (“MSMEs”) in Southern Africa. The group includes
established and highly respected brands such as Kazang, Cash
Connect, Capital Connect and Kazang Connect. Visit
www.connected.co.za for additional information about the Connect
Group.
About Net1
Net1 is a leading financial technology company
that utilizes its proprietary banking and payment technology to
deliver on its mission of financial inclusion through the
distribution of low-cost financial and value-added services to
underserved consumers and merchants in Southern Africa. Net1 also
provides transaction processing services, including being a payment
processor and bill payment platform in South Africa. Net1 leverages
its strategic investments to further expand its product offerings
or to enter new markets.
Net1 has a primary listing on NASDAQ (NasdaqGS:
UEPS) and a secondary listing on the Johannesburg Stock Exchange
(JSE: NT1). Visit www.net1.com for additional information about
Net1.
Forward-Looking Statements
This press release contains forward-looking
statements that involve substantial risks and uncertainties. All
statements, other than statements of historical fact, included in
this press release regarding strategy, future operations, future
financial position, future revenues, projected costs, prospects,
plans and objectives of management are forward-looking statements.
The Company may not actually achieve the plans, intentions or
expectations disclosed in its forward-looking statements. Actual
results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking
statements that the Company makes. Factors that might cause such
differences include, but are not limited to: the risk that the
Company’s business and the Connect Group’s business will not be
integrated successfully; the possibility that the expected
synergies from the acquisition will not be realized, or will not be
realized within the expected time period; disruption from the
acquisition making it more difficult to maintain business and
operational relationships; and other factors, many of which are
beyond the Company’s control; and other important factors included
in the Company’s reports filed with the Securities and Exchange
Commission, particularly in the “Risk Factors” section of the
Company’s Annual Report on Form 10-K for the fiscal year ended June
30, 2021, as such Risk Factors may be updated from time to time in
subsequent reports. The Company disclaims any obligation to update
any forward-looking statements, whether as a result of new
information, future events or otherwise.
Investor Relations
Contact:ICREmail: net1IR@icrinc.com
Media Relations Contact:Bridget
von HoldtCo-Market Leader | MD – BCWPhone: +27-82-610-0650Email:
bridget.vonholdt@bcw-global.com
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