Competition commissions in South Africa, Namibia and Botswana have given the go-ahead for financial technology company, Net1 UEPS Technology’s acquisition of Connect Group, cementing its comeback from financial losses emanating from the cancellation of its contract to process social grants. Picture : Nicholas Rama
COMPETITION commissions in South Africa, Namibia and Botswana have given the go-ahead for financial technology company, Net1 UEPS Technology’s acquisition of Connect Group, cementing its comeback from financial losses emanating from the cancellation of its contract to process social grants.
The value of the merger by Net1, which has a primary listing in New York and a secondary listing on the JSE, has been put at R3.7 billion and described as transformational for both the industry and the company.
Net1 had nosedived into loss making, but has been clawing out of the red in the past few months. In May last year, Net1 reported that it had narrowed its March quarterly loss from $35 million (R526.6m) in the same period in 2020 to $6.2m.
It blamed lower hardware and prepaid airtime sales for the 17 percent decline in revenues to $28.8m for the quarter to end March, 2021.
Now the company is expanding, and on Friday announced that competition authorities in Botswana and Namibia had approved its acquisition of a100 percent shareholding in Connect Group in January and February 2022.
The South African competition authority approved the acquisition this month on public interest conditions “relating to employment, increasing the spread of ownership by historically disadvantaged people and workers, and investing in supplier and enterprise development” by the company.
Further to increasing the spread of ownership by the previously disadvantaged persons in South Africa, Net1 is also required to establish an employee share ownership scheme that complies with principles for the benefit of the workers of the merged entity.
Said Chris Meyer, Net1 chief executive, “The approval (of the acquisition) is a major milestone towards the completion of the transaction, and we are looking forward to integrating Connect Group into Net1.”
He said the acquisition of Connect Group was aimed at advancing financial inclusion by offering “payment processing and financial services to underserved” merchants and consumers.
The deal would also help “drive significant growth and create a truly unique entity that will advance greater financial inclusion,” said Steven Heilbron, chief executive for Connect Group.
This transaction feeds into Net1’s previously announced strategy “to transform into a leading fintech platform”. The merged entity would have additional clout through combining complementary product offerings from the two companies, which will “drive stronger” unit economics, the company said.
The acquisition allows Net1 to expand into digitised cash management, merchant acquiring and merchant lending. This will complement the company’s insurance, and consumer financial services infrastructure.
“Offering multiple products to a single customer reduces churn, increases take-rate, and improves unit economics,” Heilbron said.
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