Net1 receives competition law approval in respect of the Connect Group transaction
10 März 2022 - 10:05PM
Net 1 UEPS Technologies, Inc. (NasdaqGS: UEPS; JSE: NT1) (“Net1,”
or the “Company”) today announced that it has received approval
from the South African, Botswanan and Namibian competition
authorities in respect of its acquisition of 100% of the shares and
claims in the Connect Group. The merger was approved
unconditionally by the Botswana and Namibia competition authorities
on January 12, 2022 and February 24, 2022 respectively, and by the
South African competition authorities on March 9, 2022, subject to
the merger conditions described below. The transaction completion
is still subject to the finalization of certain outstanding
conditions precedent, as described further below.
Quote from Chris Meyer, Net1 Group
CEO
“We welcome the decision by the competition
authorities in approving the acquisition by Net1 of the Connect
Group, subject to certain conditions. This approval is a major
milestone towards the completion of the transaction, and we are
looking forward to integrating Connect Group into Net1. This
landmark acquisition will advance our shared mission of financial
inclusion by offering payment processing and financial services to
underserved merchants and consumers,” said Chris Meyer, Group CEO
of Net1.
Quote from Steven Heilbron, Connect
Group CEO
“The approval by the competition authorities is
an important milestone towards closing the transaction. We believe
the combined Net1 and Connect Group management teams will be able
to drive significant growth and create a truly unique entity that
will advance greater financial inclusion in our country. We are
looking forward to the conclusion of the transaction and the start
of a new journey that will see Net1 and Connect Group reach ever
greater achievements,” said Steven Heilbron, CEO of the Connect
Group.
Conditions to the transaction imposed by
the South African competition authorities
The South African Competition Tribunal approved
the transaction subject to certain public interest conditions
relating to employment, increasing the spread of ownership by
historically disadvantaged people (“HDPs”) and workers, and
investing in supplier and enterprise development.
Further to increasing the spread of ownership by
HDPs: Net1 is required to establish an employee share ownership
scheme (“ESOP”) that complies with certain design principles for
the benefit of the workers of the merged entity to receive a
shareholding in Net1 equal in value to at least 3% of the issued
shares in Net1. If within 24 months of the implementation date of
the transaction, Net1 generates a positive net profit for
3 consecutive quarters, the ESOP shall increase to 5% of the
issued shares in Net1. The final structure of the ESOP is
contingent on Net1 shareholder approval and relevant regulatory and
governance approvals.
Outstanding conditions precedent to the transaction
agreement
The following conditions precedent for the transaction remain
outstanding, and are expected to be fulfilled by the end of March
2022:
- Net1 has confirmed that the facility agreements for the funding
of a portion of the consideration for the acquisition Connect Group
have become unconditional, including the fulfilment of the
conditions precedent which are under Net1's sole control.
- The counterparties to designated
agreements have consented to the change of control over the
companies in the Connect Group that will result from the
implementation of the acquisition of the Connect Group.
Strategic Rationale
Net1 has previously communicated its vision to
transform into the leading fintech platform for underserved
consumers and merchants in South Africa. The acquisition of the
Connect Group significantly advances that vision and is
transformational for Net1.
The combination of Net1 and the Connect Group is
strategically important for the following reasons:
- Combining complementary
product offerings to drive stronger unit economics: the
Connect Group fills four key gaps in Net1’s product offering,
namely the provision of value-added services directly to MSME’s,
digitized cash management, merchant acquiring and merchant lending.
On the other hand, Net1 brings issuing, insurance, and consumer
financial services infrastructure to the Connect Group. Offering
multiple products to a single customer reduces churn, increases
take-rate, and improves unit economics.
- Expansion of addressable
market in informal MSMEs: while Net1 has an established
presence amongst formal enterprises, it does not currently serve
any of South Africa’s estimated 1.4 million informal MSMEs. Connect
Group serves over 35,000 informal MSMEs and is a leading provider
of financial services to this growing customer segment.
- Attractive financial
profile with strong and profitable growth: the Connect
Group has delivered exceptional historical growth in throughput,
revenue, earnings, and free cash flow. Further, there is
significant room for continued growth, supported by secular
tailwinds.
- Merging highly skilled
teams with complementary expertise: the Connect Group has
a proven track record of successfully launching and commercializing
innovative financial solutions and a demonstrated ability to
successfully integrate with new operating groups.
- Better serving the
underserved: Net1 and the Connect Group are united by
their commitment to provide dignified financial services to people
and businesses who are underserved by the financial system. Net1’s
base of more than one million retail customers and the Connect
Group’s base of over 44,000 MSME customers are underserved by
traditional financial services.
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 announcement contains forward-looking
statements that involve known and unknown risks and uncertainties.
A discussion of various factors that may cause actual results,
levels of activity, performance or achievements to differ
materially from those expressed in such forward-looking statements
are included in our filings with the Securities and Exchange
Commission. With respect to our proposed acquisition of the Connect
Group, additional factors that could cause actual results to differ
materially from those indicated or implied by the forward-looking
statements include, among others: (1) the occurrence of any event,
change or other circumstances that could give rise to the
termination of the share purchase agreement relating to the
proposed acquisition; (2) the ability to satisfy all conditions to
completion of the proposed acquisition, including any conditions
imposed by regulatory agencies (3) unexpected costs, charges or
expenses resulting from the transaction; (4) the disruption of
management’s attention from our ongoing business operations due to
the proposed acquisition; (5) changes in the financial condition of
the markets that the Connect Group serves; (6) risks associated
with the Connect Group’s product and service offerings or its
results of operation including reduced cash settlements through
Connect Group’s vault infrastructure or higher cash losses, lower
than expected growth in Connect Group’s value added services, lower
than expected levels of loan advances or higher credit losses and
slower than expected growth in card transactions; (7) the
challenges, risks and costs involved with integrating the
operations of Connect Group with ours; and (8) our ability to
realize the anticipated benefits of the proposed acquisition. The
Company undertakes no obligation to revise any of these statements
to reflect future events.
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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