Net1 UEPS Technologies will pay outgoing-CEO Serge Belamant $8 million (R105 million) for leaving the company, a figure major shareholder Allan Gray says it has noted "with outrage".
The group disclosed the information in a filing to the US Securities and Exchange Commission (SEC) yesterday. Net1 has a primary listing on the Nasdaq in the US and a secondary listing on the Johannesburg Stock Exchange (JSE).
According to the SEC filing, Belamant will receive a severance payment of $1 million (R13 million) "representing compensation for 27 years of service with the company, less applicable withholdings and deductions" as well as another payment of $7 million (R92 million) for his "cooperative resignation".
The payments will be part of a "separation and release of claims agreement" that Net1 and Belamant entered into on 24 May. Last week, the company announced Belamant would retire as the company's CEO and director on 31 May and current CFO Herman Kotz'e would take over as CEO on 1 June. Belamant was only due to retire at age 65 in 2018.
Net1 says Belamant's resignation "was not due to any dispute or disagreement with the company over any matter relating to the company's operations, policies or practices". This despite Net1 dominating news headlines for the past few months over its controversial connection to the payment of social grants in SA.
On 24 May, Belamant also entered into a consulting agreement with Net1 to work as an independent contractor providing consulting services, for a period of up to two years following his departure, and will be paid $50 000 (R655 600) per month for this.
The parties also signed a stock repurchase agreement that says Net1 will repurchase over one million shares of company stock owned by Belamant at a price of $10.80 (R141.61) per share, within 10 days after the separation date. It agreed to the accelerated vesting of 200 000 shares of restricted stock granted to Belamant in August 2016 and the repurchase of over 252 000 "in-the-money stock options".
The repurchase price is an almost 15% premium on the stock, which closed at R123.56 a share on the JSE yesterday and which was worth around $9.41 per share at the close of trade in New York.
The stock has lost 14% in value on the Nasdaq this year so far and dropped over 40% over a two-year period, according to Bloomberg data.
Shareholder outrage
Net1's second largest shareholder Allan Gray has condemned Belamant's severance package.
"We are very surprised that Mr Belamant was able to negotiate such an extravagant deal after such broad public censure and believe that it is unjustified given current circumstances," Allan Gray chief investment officer Andrew Lapping said in a statement on the group's Web site today.
"For a number of years, we have been concerned about multimillion-rand ex-gratia severance payments made to executives and that shareholders are unable to block such payments. We have raised our concerns with the King IV project team, as well as the JSE during their review of the JSE listings requirements, and made the recommendation that material severance payments to executives should be subject to a binding vote by shareholders.
"As our proposals have not been implemented and we were not privy to the negotiation with Mr Belamant, we regret the settlement reached," Lapping said.
According to Bloomberg data, Allan Gray owns a 15.56% stake in Net1.
Continued CPS controversy
According to papers filed in the Constitutional Court (ConCourt) by KPMG on 30 May, Net1's subsidiary Cash Paymaster Systems (CPS) made almost R1.1 billion in pre-tax profit for distributing social grants on behalf of government.
In March, the ConCourt decided to extend an invalid CPS contract for another 12-months to avert a potential social grants payments disaster. This after the South African Social Security Agency (SASSA) failed to timeously find a suitable services provider and successfully facilitate the switch of payments in-house. The agency admitted it underestimated the mammoth task of taking control of social grant payments, which resulted in it coming up short with working solutions to pay social grants.
The original tender contract was declared invalid in November 2013 after it emerged irregular tendering processes were followed in awarding it.
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