SOUTH AFRICANet 1 UEPS Technologies, a financial technology business with operations in Africa, Asia, and Europe, has announced the signing of a formal deal to buy Connect Group, a South African competitor, outright.

The total value of the transaction is estimated to be roughly 3.7 billion rand (US$242 million).

This operation reinforces Net1’s ambition to become the leader in the fintech sector in South Africa. The acquisition is expected to close in the first quarter of 2022, as it is subject to regulatory approval and the satisfaction of customary finalization conditions.

“As a standalone business, Connect Group has become one of South Africa’s fastest growing fintech businesses serving MSMEs,” said Steven Heilbron, CEO of the Connect Group.

“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.”

He added that he was 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,” he added.

Chris Meyer, CEO of Net1 Group, said it enabled him to expand the customer base of small and medium-sized enterprises (SMEs).

This is the seventh acquisition announcement for a fintech company active in Africa this year, according to data available on the Crunchbase platform.

2021 is thus a record year for fintech acquisitions, since 2002 that information on the sector has been collected. However, the amount of transactions on previous transactions is not known.

“Our vision is to transform Net1 into the leading South African fintech platform, offering payment processing and financial services to underserved merchants and consumers,” said Chris Meyer, Group CEO of Net1.

“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.”

To finance this operation, Net1 will use several types of mechanisms, including debt, the issuance of new shares, and cash compensation. The company immediately realizes a potential positive capital gain, as Connect Group is valued at US$315.3 million.

The Connect Group, which was founded in 2006, is a lucrative, fast-growing, and market-leading provider of financial technology solutions to almost 44,000 micro, small, and medium enterprises (MSMEs) in Southern Africa.

The Connect Group’s customer base includes over 8,600 formal MSMEs and over 35,000 informal MSMEs as of February 28, 2021.

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