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Net 1 wraps up empowerment deal

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 17 Apr 2014
The empowerment deal should aid the creation of a long-term sustainable business in SA, says Net 1 CEO Serge Belamant.
The empowerment deal should aid the creation of a long-term sustainable business in SA, says Net 1 CEO Serge Belamant.

Net 1 UEPS Technologies has finally implemented its long-awaited empowerment deal, issuing 4.4 million shares to its empowerment partners at R60 million each, in a deal worth R264 million.

Net 1's share price closed at R98 last night, giving it a market capitalisation of R5.7 billion. The group has 58.4 million shares in issue, which gives its partners a 7.5% stake in the dual-listed company.

Of the 4.4 million shares to be issued, 4.1 million will go to Business Venture Investments 1 567, and the balance to Born Free Investments 272. No information has been provided about Net 1's new empowerment partners.

Net 1 has lent its new partners funds, at a market-related interest rate, so they can purchase the stock. The loan, which will be secured by the shares, must be repaid over five years.

Chairman and CEO Serge Belamant said in December, when the black economic empowerment deal (BEE) was announced, that it will "lay the foundation for a long-term sustainable business in SA, together with the addition of BEE partners, who we expect to be actively engaged in identifying and driving new growth opportunities for the company".

Delayed

The conclusion of the deal follows a February 2013 announcement in which it explained a probe by US authorities into its social welfare payment contract led to its BEE partners not taking up stock options, because its share price had fallen dramatically.

Net 1 inked its initial BEE deal in 2012 and granted that consortium an option to purchase 8.96 million shares, at a price of $8.96 per share, which expired on 17 April 2013.

The US Securities and Exchange Commission and Department of Justice's Criminal Division has been investigating whether there was bribery involved in Net 1's R10 billion contract with the South African Social Security Agency (SASSA). The outcome of that probe has yet to be announced.

In addition, the Constitutional Court last November ruled the contract was invalid, but "suspended its declaration of invalidity, pending determination of a just and equitable remedy", said Net 1 in a statement.

Losing bidder AllPay, a unit of big four bank Absa, turned to the Constitutional Court in yet another attempt to have the multibillion-rand tender process declared invalid. The tender was awarded to Net 1 unit Cash Paymaster Services (CPS). Both CPS and SASSA opposed AllPay's application.

AllPay argued the five-year deal, to service around 15 million grant recipients, was not awarded lawfully. AllPay's action followed its loss in the Supreme Court of Appeal, which is where the matter was heard after the North Gauteng High Court ruled that, while the deal was illegal and invalid, it would remain in place so that payments could continue.

There was be a hearing on 11 February to arrive at a solution, but the judgment has yet to be announced. Net 1's results will be published on 9 May.

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