Net1 buys Korean payment firm

Net1 UEPS Technologies says it will buy 98.7% of KSNet, which is a payment processing company in the Republic of Korea, for about R1.7 billion.

Net1 provides a universal electronic payment system (UEPS) as an alternative payment system for the unbanked and under-banked populations of developing economies.

Yesterday, it said it was expanding in Korea and Asia through the purchase of KSNet for about 270 billion Korean won or about $233 million (R1.7 billion).

The company, which is present in several African countries, Iraq, Russia, Vietnam and India, among others, will pay for the deal through cash reserves and new debt facilities.

Chairman and CEO Serge Belamant says the deal “marks a key milestone for Net1, and fits squarely into our long-term vision of globalising the company, penetrating certain key growth markets, while also diversifying our business internationally”.

Belamant explains that KSNet offers Net1 the opportunity to capitalise on its position in a high-growth market, advance its newer businesses in banking, and introduce some of Net1's other offerings.

Net 1 says the deal will immediately add to its fundamental earnings for next year and should be wrapped up in the second quarter of its financial year. During the last quarter of its 2010 financial year, the company grew revenue, but a goodwill write-off hampered net profit.

During the 12 months to June, KSNet generated revenue of about $86 million, which was a year-on-year improvement of 23%. Net1 says it will account for about 30% of Net1's revenue and will diversify its revenue and earnings “meaningfully” away from its core SA operations.

KSNet is the fastest growing and most profitable payment solutions provider in Korea, has the broadest product offering in the country, a base of about 200 000 merchants and an extensive direct and indirect sales network, says Net 1. The deal will provide Net1 with a meaningful base in Asia.

The company explains that more than 90% of KSNet's revenue comes from the provision of payment processing services to merchants and card issuers through its value added network. Over the past two years, KSNet's transaction processing volume has increased at 24% on a compound annual basis and hit 1.4 billion transactions during calendar year 2009, says Net 1.

Net 1 expects the deal to strengthen its long-term growth platform. It is also strategically important because KSNet generates strong cash flow and grew revenue and cash flow despite the recession.