Net 1 UEPS Technologies has signed a definitive agreement to buy Connect Group for around $242m (ZAR3.7bn).
Following adjustment of net debt and debt-like items, the implied enterprise value of Connect Group is expected to be $315.3m (ZAR4.8bn).
Go deeper with GlobalData
Subject to regulatory approval and fulfilment of customary closing conditions, the deal is expected to complete in the quarter ending 31 March 2022.
Set up in 2006, the Connect Group provides financial technology solutions to almost 44,000 micro, small and medium enterprises (MSMEs) in South Africa.
The firm provides four main product lines to its customer base, which included over 8,600 formal MSMEs and more than 35,000 informal MSMEs as at 28 February 2021.
These product lines consist of a prepaid value-added services platform branded Kazang; a digitized cash management platform branded Cash Connect; a merchant lending platform branded Capital Connect; and merchant acquiring solutions branded Kazang Pay and Card Connect.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataNet 1 believes that the Connect Group is positioned well to tap a market that is estimated to be at around 0.7 million formal MSMEs and 1.4 million informal MSMEs in the country.
Net1 will fund the deal through $150m (ZAR2.35bn) in debt, which consists of $71m (ZAR1.1bn) in a five-year term facility; a $9.72m (ZAR150m) general banking facility that would replace Connect Group’s current debt facilities and ZAR1.1bn in 18-month bridge facilities secured against Net1’s assets.
The deal also features a deferred consideration of $22.7m (ZAR350m), which will be settled through the issuance of around 3.1 million Net1 shares of common stock, with the remaining balance to be funded by current cash resources of Net1.
Connect Group CEO Steven Heilbron said: “We believe that this transaction will create distinct field advantages and will take the group to heights that neither entity would achieve alone.”
Net1 Group CEO Chris Meyer said: “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.”
