Johannesburg Stock Exchange-listed group Net1 has been granted regulatory approval to take control of one of SA’s biggest fintech firms, Connect Group, in a R3.7 billion deal.
Net1, which is also listed on Nasdaq, announced today that anti-trust authorities in SA, Botswana and Namibia had consented to its acquisition of 100% of the shares and claims in the Connect Group.
The transaction was first announced in November last year, when Net1 signed a definitive agreement to acquire 100% of the Connect Group.
In the notice to shareholders at the time, the company said the acquisition of a “profitable, high-growth and leading South African fintech company is transformational for Net1 in its journey to becoming South Africa’s leading fintech platform”.
Connect Group, which was founded in 2006, is one of the leading providers of fintech solutions in the country and services nearly 44 000 micro, small and medium enterprises in Southern Africa.
Today’s announcement comes on the back of recent moves by Net1 to rejig its focus in SA, targeting the fintech prime spot organically, as well as through mergers and acquisitions.
Net1 announced last year that it was targeting the company’s areas of core competency in a bid to cement itself as the leading fintech player.
In an update on the matter today, Net1 notified shareholders that the merger has now received the greenlight, being approved unconditionally by the Botswana and Namibia competition authorities on 12 January and 24 February, respectively, and the South African competition authorities on 9 March.
In SA, the Competition Tribunal approved the transaction subject to certain conditions, including those relating to employment.
Net1 is expected to increase the spread of ownership by historically disadvantaged people (HDPs) and workers, as well as invest in supplier and enterprise development.
Net1 is also 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”.
Also, if within 24 months of the implementation date of the transaction, Net1 generates a positive net profit for three 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,” reads the Net1 update.
“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,” says Chris Meyer, group CEO of Net1.
“This landmark acquisition will advance our shared mission of financial inclusion by offering payment processing and financial services to underserved merchants and consumers.”
Steven Heilbron, Connect Group CEO, says: “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.”
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