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Net1 makes R3.7bn fintech move with Connect Group buy

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 02 Nov 2021

Johannesburg Stock Exchange (JSE)-listed group Net1 has taken control of one of SA’s biggest fintech firms, Connect Group, in a R3.7 billion deal.

Net1 announced today on the JSE that it has signed a definitive agreement to acquire 100% of the Connect Group.

In the notice to shareholders, the company says 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 (MSMEs) in Southern Africa.

Net1 says the company is highly-profitable, with strong unit economics – marked by a historic three-year compound annual growth rate in EBITDA in excess of 40% for its financial year ended 28 February 2021.

The Connect Group deal follows recent moves by Net1 to rejig its focus in SA, targeting fintech as the prime spot.

Announcing the Connect Group acquisition today, Net1 Group CEO Chris Meyer explained the company’s new direction in SA.

“Our vision is to transform Net1 into the leading South African fintech platform, offering payment processing and financial services to underserved merchants and consumers. 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.

“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-calibre team to Net1 and are confident the combined group will significantly exceed the sum of the parts.”

The Connect Group delivers four main product lines to its customer base: Kazang – a prepaid value-added services platform; Cash Connect – a digitised cash management platform; Capital Connect – a merchant lending platform; and Kazang Pay and Card Connect, which provide merchant acquiring solutions.

Steven Heilbron, Connect Group CEO, comments: “As a standalone business, Connect Group has become one of South Africa’s fastest growing fintech businesses serving MSMEs. Having spent a lot of time with the Net1 management team and directors over the last year, I believe the combined management teams of the Connect Group and Net1 will work very well together.

“I am very 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 this transaction will create distinct field advantages and will take the group to heights that neither entity would achieve alone.”