Net 1 UEPS Technologies has signed a definitive agreement to acquire 100% of the Connect Group for a consideration of approximately R3,7-billion, or $242-million at an exchange rate of $1:R5.22.
The acquisition is expected to close in the quarter ending March 31, 2022, as it is subject to regulatory approval and satisfaction of customary closing conditions.
Chris Meyer, CEO of the Net1 Group, comments: “Our vision is to transform Net1 into the leading South African fintech platform, offering payment processing and financial services to underserved merchants and consumers. The acquisition of the Connect Group transforms our merchant offering, MSME footprint and growth trajectory, while also uniquely positioning us to be the South African market leader serving both merchants and consumers.
“Further, Connect Group advances our mission of financial inclusion by bringing into the Net1 fold a base of 44,000 MSMEs, many of whom are informal businesses. We welcome the Connect Group’s high-caliber team to Net1 and are confident that the combined group will significantly exceed the sum of the parts.”
Steven Heilbron, CEO of Connect Group, adds: “As a standalone business, Connect Group has become one of South Africa’s fastest growing fintech businesses serving MSMEs.
“Having spent a lot of time with the Net1 management team and directors over the last year, I believe that the combined management teams of the Connect Group and Net1 will work very well together. I am very confident that this transaction fast tracks the combined businesses which together, now has the essential and differentiated building blocks required to deliver on the focused objective of being the leading South African fintech platform.
“We believe that this transaction will create distinct field advantages and will take the group to heights that neither entity would achieve alone.”
Founded in 2006, the Connect Group is a high-growth provider of financial technology solutions to nearly 44 000 micro, small and medium enterprises (MSMEs) in Southern Africa. As at 28 February 2021, the Connect Group’s customer base includes more than 8 600 formal MSMEs and over 35 000 informal MSMEs.
The Connect Group delivers four main product lines to its customer base under various brands:
* A prepaid value-added services platform branded Kazang;
* A digitised cash management platform branded Cash Connect;
* A merchant lending platform branded Capital Connect; and
* Merchant acquiring solutions branded Kazang Pay and Card Connect.
The Connect Group has reached significant scale and continues to grow swiftly. In its last financial year ended February 28, 2021, the Connect Group grew earnings before interest, depreciation and amortisation (EBITDA) by approximately 30% on the prior year, notwithstanding the significant impact of Covid-19 lockdowns on the South African economy and MSME segment that it serves.
The Connect Group settled cash of R79,5-billion through its retail cash vault infrastructure, sold R13,2billion of value-added services through its point-of-sale (PoS) terminals and digital wallets, advanced over R280-million in growth capital to SME businesses, and processed R2,6-billion in card transactions through its POS terminals.
This resulted in net revenue of approximately R1,1-billion, which represents a historic three-year compound annual growth rate of approximately 30%.
Net revenue is a non-GAAP measure and is described below under About Connect Group together with a reconciliation to the GAAP measure. All amounts translated at the average exchange rate for the year to 28 February 2021 of $1: R16.51.