Net1 Announces Acquisition of BGS Smart Card Systems
28 August 2008 - 2:00PM
PR Newswire (US)
JOHANNESBURG, South Africa, Aug. 28 /PRNewswire-FirstCall/ -- Net 1
UEPS Technologies, Inc. ("Net1" or the "Company") (NASDAQ:UEPS)
today announced that it has acquired 80.1% of BGS Smartcard Systems
AG ("BGS"), an Austrian private company that provides smart
card-based payment systems to banks, enterprises and government
authorities in Russia, Ukraine, Uzbekistan, Mongolia, Vietnam,
India and Oman. BGS' system, Dual Universal Electronic
Transactions, or DUET, was developed by BGS as a derivative of the
first version of Net1's UEPS technology that Net1 licensed to BGS
in 1993. BGS' largest customer is Sberbank, the largest financial
institution in Russia, which owns the remaining 19.9% of BGS. In
the acquisition, Net1 paid the selling shareholders approximately
euros 71.5 million in cash and issued certain shareholders an
aggregate of 40,134 shares of Net1 common stock. Net1's management
believes that the acquisition of BGS offers numerous potential
strategic benefits, including the following: -- Increasing Net1's
revenues from providing its financial services and value-added
products to a new cardholder base. BGS has historically employed a
business model which focused on selling its product offering into
various countries. In contrast, Net1's service-based business model
focuses on generating continuing revenues from its cardholder base
through transaction-based fees, financial services and value-added
products. Management believes that the geographical footprint of
BGS is now large enough to allow Net1 to overlay its service-based
model onto the various DUET systems operating in Russia and other
countries, thereby creating new revenue streams for BGS and system
operators. -- Enhancing Net1's product offering by leveraging
technology platforms and IT development resources. Management
believes that Net1's technological leadership in fields such as
biometric identification and in the integration of its UEPS
technology with GSM will allow Net1 to create new business
opportunities for BGS such as national identification, voting and
welfare distribution systems and cell phone-based payment
solutions. Further, the addition of BGS' skilled human resources in
the information technology area should greatly assist Net1 in the
ongoing development of its technologies and maintenance of its
existing systems. -- Increasing the depth of the management team
with the addition of experienced executives. Leonid Delberg and
Richard Schweger have led BGS since 1997 and have over 25 years of
combined experience in the smart card industry. Messrs. Delberg and
Schweger will continue as senior executives of BGS and oversee its
expansion and integration with Net1. The Company believes that the
expertise and experience of BGS' senior management will greatly
assist Net1 in its global expansion initiatives. -- Accelerating
the rollout of UEPS in Russia and other new territories. There is
little geographical overlap in our and BGS' operations and thus,
the acquisition offers Net1 the opportunity to establish
relationships in countries where management believes there are
exciting opportunities for the implementation of its technology but
where Net1 has minimal current relationships. Management believes
that having a local partner is important to the success of
international implementation of Net1's systems. Thus, management
further believes that Sberbank, through its leading market position
in Russia, can offer Net1 its extensive business network to
implement Net1's complete suite of products there and will be
motivated to do so by virtue of its continued participation as a
shareholder in BGS. "We are incredibly excited about the
acquisition of BGS as it represents another significant milestone
in the implementation of our international expansion strategy,"
said Dr. Serge Belamant, Net1's Chairman and Chief Executive
Officer. "We can now introduce the UEPS and our full suite of
products and services in Russia and other countries where we have
not operated to date and provide all their citizens with access to
a new range of financial products and services made possible by our
UEPS technology. The addition of Leonid Delberg and Richard
Schweger, with their many years of experience in the smart card
payment industry, to our already talented management team will
undoubtedly help us grow the business in these and other
countries." Leonid Delberg, Chairman and CEO of BGS, added, "Net1,
with its rich history of technological innovation, offers BGS a
unique opportunity to expand the types of products and services
that we can provide to our customers. We very much look forward to
working with Serge and the rest of his team to capitalize on the
synergies of our payment technologies." Net1 financed the cash
portion of the purchase price of the BGS shares with the proceeds
of bank financing which it expects to repay within the next several
months from its cash reserves. The Company is in the process of
listing its shares on the JSE Limited. The listing will result in
the conversion into common stock of all of Net1's convertible
preferred stock and will allow its main South African operating
subsidiary to repay certain inter-company loans extended to it by
Net1 in connection with the 2004 Aplitec acquisition. The funds
provided by the repayment of these loans will be used to repay the
bank facility. About Net1 (http://www.net1ueps.com/) Net1 provides
its universal electronic payment system, or UEPS, as an alternative
payment system for the unbanked and under-banked populations of
developing economies. The company believes that it is the first
company worldwide to implement a system that can enable the
estimated four billion people who generally have limited or no
access to a bank account to enter affordably into electronic
transactions with each other, government agencies, employers,
merchants and other financial service providers. To accomplish
this, Net1 has developed and deployed the UEPS. This system uses
secure smart cards that operate in real-time but offline, unlike
traditional payment systems offered by major banking institutions
that require immediate access through a communications network to a
centralized computer. This offline capability means that users of
Net1's system can enter into transactions at any time with other
cardholders in even the most remote areas so long as a portable
offline smart card reader is available. In addition to payments and
purchases, Net1's system can be used for banking, health care
management, international money transfers, voting and
identification. Net1 also focuses on the development and provision
of secure transaction technology, solutions and services. Its core
competencies around secure online transaction processing,
cryptography and integrated circuit card (chip/smart card)
technologies are principally applied to electronic commerce
transactions in the telecommunications, banking, retail, petroleum
and utilities market sectors. These technologies form the
cornerstones of the "trusted transactions" environment of Prism, a
South African based subsidiary of the company, and provide the
Company with the building blocks for developing secure end-to-end
payment solutions. About BGS (http://www.bgssmartcard.com/) BGS is
an Austrian company whose core business consists of developing and
integrating smart card-based offline and online financial
transaction systems. Since 1993, BGS has implemented tailor-made
smart card-based payment solutions, focusing on emerging economies
and in cooperation with banks, enterprises and government
authorities. BGS is headquartered in Vienna, Austria, and has
subsidiaries in India and Russia, and a branch office in the
Ukraine. Distributors are located in Asia, Central and South
America, the Commonwealth of Independent States and the Middle
East. BGS employs more than 100 people worldwide, including 75
staff members in the research and development and the technical
division. BGS' approach is to offer its customers an adaptive and
flexible turnkey solution which encompasses modular smart card and
back-office solutions, hardware, consulting services, product
customization and integration, installation, system implementation
and technical support and training. Forward-Looking Statements This
announcement contains forward-looking statements that involve known
and unknown risks and uncertainties. A discussion of various
factors that could cause the Company's actual results, levels of
activity, performance or achievements to differ materially from
those expressed in such forward-looking statements are included in
the Company's filings with the Securities and Exchange Commission.
The Company undertakes no obligation to revise any of these
statements to reflect future circumstances or the occurrence of
unanticipated events. DATASOURCE: Net 1 UEPS Technologies, Inc.
CONTACT: William Espley, Investor Relations of Net 1 UEPS
Technologies, Inc., +1-604-484-8750, or +1-866-412-NET1 (6381) Web
site: http://www.net1ueps.com/ http://www.bgssmartcard.com/
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