Lesaka completes the acquisition of Adumo, cementing its position as the leading independent fintech in Southern Africa

Rhea-AI Summary

Lesaka Technologies (Nasdaq: LSAK; JSE: LSK) has completed its acquisition of Adumo RF, South Africa's largest independent payments processor. The transaction, valued at ZAR 1.67 billion ($96.2 million), was settled through the issuance of 17,279,803 Lesaka shares and a cash payment of ZAR 232.2 million ($13.4 million).

This acquisition strengthens Lesaka's position as a leading fintech in Southern Africa, enhancing its consumer and merchant markets. The combined entity will serve 1.7 million active consumers, 120,000 merchants, and process over ZAR 270 billion in annual throughput. The Group will operate in 5 countries with over 3,300 employees.

Adumo CEO Paul Kent joins Lesaka's executive team, while Crossfin CEO Dean Sparrow joins the board as a non-executive director. Lesaka has also agreed to purchase 2,601,410 of its own shares for ZAR 207.2 million ($12.0 million) to provide liquidity to certain indirect Adumo shareholders.

Positive

• Acquisition of Adumo strengthens Lesaka's position as a leading fintech in Southern Africa
• Combined entity will serve 1.7 million active consumers and 120,000 merchants
• Annual throughput expected to exceed ZAR 270 billion
• Expansion of operations to 5 countries with over 3,300 employees
• Addition of experienced leadership with Adumo CEO joining executive team

Negative

• Issuance of 17,279,803 new shares may lead to dilution for existing shareholders
• Cash payment of ZAR 232.2 million ($13.4 million) for acquisition may impact short-term liquidity
• Additional share repurchase of ZAR 207.2 million ($12.0 million) further impacts cash reserves

Insights

Financial Analyst

The acquisition of Adumo by Lesaka is a significant move that solidifies Lesaka's position in the Southern African fintech market. The deal, valued at $96.2 million, was primarily financed through stock issuance, with a smaller cash component. This structure helps preserve Lesaka's cash reserves while expanding its market presence.

Key financial implications include:

• Increased market share and revenue potential from 1.7 million active consumers and 120,000 merchants
• Enhanced annual transaction throughput of ZAR 270 billion ($15.6 billion)
• Expanded geographical footprint across five countries
• Potential for cost synergies and operational efficiencies

The additional share repurchase of $12 million to provide liquidity for certain shareholders is a strategic move to facilitate the transaction. While this may slightly impact cash reserves, it demonstrates Lesaka's commitment to the deal and confidence in its stock value.

Tech Expert

This acquisition significantly enhances Lesaka's technological capabilities in the fintech space. By integrating Adumo's 20+ years of payment processing experience, Lesaka is poised to accelerate its digital transformation efforts. Key technological benefits include:

• Expanded suite of payment solutions and technologies
• Improved ability to innovate and disrupt the market
• Enhanced platform for digitizing commerce in emerging markets
• Potential for developing new, integrated fintech products

The combined entity's increased scale and technological resources position it well to address the growing demand for digital financial services in Southern Africa. This move could lead to faster product development cycles and more robust offerings for both consumers and merchants.

Market Research Analyst

Lesaka's acquisition of Adumo is a strategic move that reshapes the competitive landscape of Southern African fintech. This consolidation creates a dominant player with significant market reach and diverse capabilities. Key market implications include:

• Increased market concentration, potentially raising barriers to entry for competitors
• Enhanced cross-selling opportunities across consumer and merchant segments
• Improved positioning to capitalize on the trend of financial inclusion and digitization in emerging markets
• Potential for expanded market share and pricing power

The deal also provides Lesaka with a stronger platform for regional expansion, as evidenced by its presence in five countries. This geographical diversification could help mitigate country-specific risks and open up new growth avenues. The market is likely to view this acquisition positively, given the potential for accelerated growth and improved competitive positioning.

JOHANNESBURG, Oct. 02, 2024 (GLOBE NEWSWIRE) -- Lesaka Technologies, Inc. (“Lesaka” or the “Company”) (Nasdaq: LSAK; JSE: LSK) today announced it has completed its acquisition of Adumo RF (Pty) Ltd (“Adumo”). The transaction was settled through the issuance of 17,279,803 shares of Lesaka’s common stock and a cash payment ZAR 232.2 million ($13.4 million), implying a total purchase consideration of ZAR 1.67 billion ($96.2 million) using Lesaka’s October 1, 2024, closing price on the Johannesburg Stock Exchange of ZAR 83.05 per share. All amounts in this release have been translated to U.S. dollars at the October 1, 2024, closing exchange rate of $1: ZAR 17.34.

The acquisition of Adumo, South Africa’s largest independent payments processor with over 20 years’ experience in payment solutions, reinforces Lesaka’s position as natural consolidator of Southern African fintech. The acquisition enhances the Company’s strengths in both its consumer and merchant markets and follows the successful integration of the Connect and Kazang businesses and the recent acquisition of Touchsides.

Lesaka CEO Southern Africa Lincoln Mali said: “The Adumo transaction is an exciting addition to the Lesaka story. It significantly enhances our technology platform, adding customers, solutions, and meaningful scale. Lesaka’s full-service fintech platform will serve 1.7 million active consumers, 120,000 merchants, and process over ZAR 270 billion in throughput (ZAR 45 billion card, ZAR 105 billion VAS and ZAR 120 billion cash) per year in our connected ecosystem as we facilitate the digitization of commerce in our markets. The Group will have over 3,300 employees operating on the ground in 5 countries: South Africa, Namibia, Botswana, Zambia, and Kenya.

“I would like to extend a warm welcome to all the Adumo employees, as well as Adumo Chief Executive Paul Kent who joins our executive leadership team. Paul will take responsibility for our merchant pillar. I would also like to welcome Crossfin Chief Executive Dean Sparrow who joins our board as a non-executive director and our new shareholders – Apis Growth Fund I and African Rainbow Capital, the largest shareholder of Crossfin.”

Adumo CEO Paul Kent said: “We are thrilled to be joining the Lesaka group, creating a Southern African fintech of significant scale, with leading positions in several verticals and sectors. Our businesses are a natural fit with the combined solution set, distribution network and technologies positioning us perfectly to take advantage of the digitization across our economy. We continue to innovate and expand the holistic suite of products and services offered to our merchants in solving for their pain points.”

Steve Heilbron, Head of Corporate Development at Lesaka added: “This is an exciting day for us and for the customers that we serve. Bringing the Adumo business into the fold is a landmark transaction for Lesaka. The acquisition materially broadens our product offering to our customers and deepens our penetration in both the merchant and consumer segments. This will accelerate our growth profile. The combined scale and solutions of our fintech platform significantly enhances our ability to innovate and disrupt as well as providing a beachhead into new markets opportunities. There is a strong alignment of culture and values between Lesaka and Adumo, and we look forward to integrating our teams. I would also like to take this opportunity to welcome Paul Kent to Lesaka. We are very excited to have Paul and his team on board.”

Purchase of shares from indirect Adumo shareholders

In fulfilment of one of the conditions of the transaction, Lesaka has agreed to purchase 2,601,410 shares of its common stock, through a wholly owned subsidiary, for ZAR 207.2 million ($12.0 million), or ZAR 79.66 per shares, to provide cash liquidity to a group of indirect Adumo shareholders who were unable to receive Lesaka shares under their investment mandates. The purchase is expected to complete in early October 2024.

About Adumo

Adumo is South Africa’s largest independent payments processor with over 20 years of experience, delivering integrated payment solutions that simplify transactions for businesses of all sizes. Adumo serves approximately 23,000 active merchants with operations across South Africa, Namibia, Botswana and Kenya. For more than two decades, Adumo has facilitated physical and online commerce between retail merchants and end-consumers by offering a unique combination of payment processing and integrated software solutions, which currently include embedded payments, integrated payments, reconciliation services, merchant lending, customer engagement tools, card issuing program management and data analytics.

Adumo operates across three businesses, which provide payment processing and integrated software solutions to different end markets:

• The Adumo Payments business offers payment processing, integrated payments and reconciliation solutions to small and medium (“SME”) merchants in South Africa, Namibia and Botswana, and also provides card issuing program management to corporate clients such as Anglo American and Coca-Cola;
• The Adumo ISV business, also known as GAAP, has operations in South Africa, Botswana and Kenya, and clients in a further 21 countries, and is the leading provider of integrated point-of-sales software and hardware to the hospitality industry in Southern Africa, serving clients such as KFC, McDonald’s, Pizza Hut, Nando’s and Krispy Kreme; and,
• The Adumo Ventures business offers online commerce solutions (Adumo Online), cloud-based, multi-channel point-of-sales solutions (Humble) and an aggregated payment and credit platform for in-store and online commerce (SwitchPay) to SME merchants and corporate clients in South Africa and Namibia.
  

Adumo generates the majority of its revenue from per transaction fees that are calculated as a percentage of transaction value, and software-as-a-service (“SaaS”) subscription fees charged to merchants. As of June 30, 2024, Adumo employed approximately 950 employees throughout Southern Africa.

About Lesaka (www.lesakatech.com)

Lesaka Technologies, (Lesaka™) is a South African Fintech company driven by a purpose to provide financial services and software to Southern Africa’s underserviced consumers (B2C) and merchants (B2B), improving people’s lives and increasing financial inclusion in the markets in which we operate. We offer a wide range of solutions including transactional accounts (banking), lending, insurance, cash management solutions, card acceptance, supplier payments, software services and bill payments. By providing a full-service fintech platform in our connected ecosystem, we facilitate the digitization of commerce in our markets.

Lesaka has a primary listing on NASDAQ (NasdaqGS: LSAK) and a secondary listing on the Johannesburg Stock Exchange (JSE: LSK). Visit www.lesakatech.com for additional information about Lesaka Technologies (Lesaka ™).

Forward-Looking Statements

This press release contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be identified by their use of terms or phrases such as “expects,” “estimates,” “projects,” “believes,” “anticipates,” “plans,” “could,” “would,” “may,” “will,” “intends,” “outlook,” “focus,” “seek,” “potential,” “mission,” “continue,” “goal,” “target,” “objective,” derivations thereof, and similar terms and phrases. Forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. In this press release, statements relating to future financial results and future financing and business opportunities are forward-looking statements. Additional information concerning factors that could cause actual events or results to differ materially from those in any forward-looking statement is contained in our Form 10-K for the fiscal year ended June 30, 2024, as filed with the SEC, as well as other documents we have filed or will file with the SEC. We assume no obligation to update the information in this press release, to revise any forward-looking statements or to update the reasons actual results could differ materially from those anticipated in forward-looking statements.

Investor Relations Contact:
Phillipe Welthagen
Email: phillipe.welthagen@lesakatech.com
Mobile: +27 84 512 5393

Media Relations Contact:
Ian Harrison
Email: ian@thenielsennetwork.com

FAQ

What is the total value of Lesaka's acquisition of Adumo?

The total value of Lesaka's acquisition of Adumo is ZAR 1.67 billion ($96.2 million), based on Lesaka's October 1, 2024, closing price on the Johannesburg Stock Exchange.

How many new shares did Lesaka issue for the Adumo acquisition?

Lesaka issued 17,279,803 new shares of its common stock as part of the acquisition of Adumo.

What is the expected annual throughput for Lesaka after acquiring Adumo?

After acquiring Adumo, Lesaka expects to process over ZAR 270 billion in annual throughput, including ZAR 45 billion in card transactions, ZAR 105 billion in VAS, and ZAR 120 billion in cash transactions.

How many countries will Lesaka operate in after the Adumo acquisition?

Following the Adumo acquisition, Lesaka will operate in 5 countries: South Africa, Namibia, Botswana, Zambia, and Kenya.

What is the stock symbol for Lesaka Technologies on Nasdaq?

The stock symbol for Lesaka Technologies on Nasdaq is LSAK.