Payment solutions provider, Net1 UEPS Technologies [JSE:NT1] - the parent company of Cash Paymaster Services, which used to run SA's social grant payment system - is selling a Korean business, KSNET, for $237m - about R3.4bn.
Net1 offers debit, credit and prepaid processing and issuing services for major payment networks. Locally, it is known for providing low-cost financial inclusion products such as banking and insurance, and distributing mobile subscriber starter packs for Cell C, through a subsidiary, DNI.
The company, which is primarily listed on the Nasdaq and on the Johannesburg Stock Exchange, said in an announcement to shareholders on Monday that KSNET would be sold to Korea-based venture capital and private equity firm Stonebridge Capital and online billing and payment solutions provider Payletter - which operates in the US, Europe and Asia.
"The transaction allows Net1 to further focus on its core fintech strategy serving underbanked customers in emerging and developed economies," the group said. The transaction is subject to a financing condition, but is expected to be concluded in March 2020.
Net1 CEO Herman Kotze explained that while KSNET, a payment processor, is a "profitable and cash generative business", it operated autonomously in a developed economy, with little overlap with Net1 group's other activities.
"We also believe that the intrinsic value of KSNET was not appropriately reflected in Net1's overall valuation," he said.
Following a strategic review of the group's businesses and investment late last year, the board decided to sell KSNET, in order to focus on the core strategy, boost liquidity and maximise shareholder returns.
"We believe Stonebridge Capital and Payletter are the right strategic partners for KSNET, as they are committed to building further scale in the South Korean payments market," said Kotze.
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"This transaction marks a significant milestone in our strategic plan and allows management to further focus on its core strategy of providing fintech solutions for the underbanked in South Africa, Africa, Europe and other emerging economies, as well as our new blockchain-related products," he added.
The group is expected to provide further details on the transaction when it publishes its earnings report for the second quarter of 2020, On February 7.
For its first quarter results, Net1 reported an operating loss of $2.7m (about R39m) and a headline loss per share of R0.08. At the time the group said KSNET showed improvements in profitability following "transformational actions".
The group has been bleeding revenue, as it had lost the social grants payments contract with the South African Social Security Agency in October 2018, Fin24 previously reported.