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Net1 ploughs R2bn into Blue Label Telecoms

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Net1 has entered into a share subscription agreement with Blue Label Telecoms to subscribe for approximately 117,9-million shares in Blue Label, at a subscription price of R16.96 per share, for a total of R2-billion.
Following implementation of the subscription, Net1 will own approximately 15% of the issued ordinary shares in Blue Label.
Net1 expects to settle the subscription consideration through a combination of cash resources, debt instruments and an equity issuance of 5-million shares of common stock, at an issue price of $9.00 per share.
Following implementation of the subscription, which is subject to the finalization of the financing package and the approval of Blue Label shareholders, Net1 will be entitled to nominate a director to Blue Label’s board.
Blue Label, which operates in South Africa, Mexico and India, is a market leading virtual and physical distributor of secure electronic tokens of value as well as a provider of transactional and value added services. It also intends to acquire and 45% interest in Cell C.
For the fiscal year ended May 31, 2016, Blue Label reported revenue of R26,2-billion, EBITDA of R1,24-billion and earnings per share of R1.04.
“This investment cements the start of a multi-layered strategic alliance between our two groups that will greatly enhance shareholder value on both sides through cooperation between our combined local and international operations,” says Serge Belamant, chairman and CEO of Net1.
“Blue Label has announced that it intends to acquire 45% of Cell C, the third largest telecom operator in South Africa and this new alliance will assist Net1, Blue Label and Cell C to accelerate the growth of their combined customer bases, and facilitate cross selling opportunities between themselves.
“Our aim is to provide customers a truly bespoke, affordable and comprehensive package that will go much further than basic telephony.
“The combination of the Net1 and Blue Label infrastructures is expected to envelop all areas of South Africa through our combined physical and mobile branches, associations with merchant stores and virtual distribution services via USSD, voice, internet and social media linked with traditional payment systems including EFTs, debit and credit cards and our Virtual Card solution.
“We believe that our coalition will be a global first that provides customers with an offering that includes banking, transacting, debit and credit cards, micro-finance, insurance, distribution of both airtime and electricity, web services, voice and data as well as access to low cost handsets offering the most advanced functionality.
“In addition, the new alliance ensures that all required support services are provided in-house using our own combined technologies, software and hardware products. As a result, our technology platform can address and service the entire LSM1 to 8 categories in South Africa in a broad and meaningful way.
Brett Levy and Mark Levy, the joint CEOs of Blue Label, state: “The strategic cooperation between Blue Label and Net1 will touch multi-million consumers per day through our combined points of presence as a result of the respective parties’ combining product, distribution footprint and customers, from formal and informal retail right through to the extensive rural market.
“This will create a highly robust business model that will be resilient to disintermediation and fluctuations in economic conditions.”