New CE did not abort agreement
NET1 UEPS Technologies said on Friday that its newly-appointed chief executive, Herman Kotze, was not responsible for terminating an agreement to invest R2 billion in Blue Label Telecoms in a bid to acquire a 15 percent stake in Cell C.
This comes after Net1 announced on Thursday that it intended to pursue investments in Cell C and DNI-4PL contracts, but that it would no longer be investing directly in Blue Label Telecoms.
Kotze, Net1’s former chief financial officer, was last month appointed to lead the parent company of welfare grant payment provider Cash Paymaster Services (CPS) after Serge Belamant resigned following pressure from a major shareholder, Allan Gray.
“The board of Net1 wishes to clarify that its recently appointed chief executive did not unilaterally terminate the subscription agreement with Blue Label.
“The decision not to invest was made by the full Net1 board before the end of May 2017,” Net1 said.
Net1 was a party to the umbrella restructure agreement with Cell C in which it was going to buy a 15 percent stake in Blue Label Telecoms worth R2bn, while in turn, Blue Label was to buy a 45 percent stake in Cell C for R5.5bn.
The sale of stakes in Cell C is part of efforts to slash the mobile operator’s debts from R20bn to R6bn.
Net1 said that the proposed three investments would require the utilisation of cash reserves, bank finance and the issuance of shares of its common stock to fund the transactions.
It said that the material reduction in its share price in the first five months of 2017 and the lack of volume demand for its shares would have made it detrimental to its shareholder value for it to proceed with a share placement.
The company would now use surplus cash and debt to pursue the acquisition.
“The board accordingly concluded that Net1 could only use cash resources and bank debt and could therefore only conclude two of the three investments,” Net1 said.
“Net1 approached Blue Label on these matters and both parties mutually agreed that Net1 would not subscribe for shares in Blue Label and would proceed only with the investments in Cell C and DNI.
“Blue Label would replace the Net1 subscription with a private placement with other parties to part fund its investment in Cell C.”
Net1 is currently at the centre of the controversy around the distribution welfare grants payments in South Africa after an affidavit by auditing firm KPMG revealed that it made R1bn in profit from its unlawful contract with the South Africa Social Security Agency over a period of five years.
Net1 subsidiary, CPS, administers the social grants payments of more than R140bn to more than 17 million beneficiaries in South Africa.