Net1 sells 17% stake in DNI to settle R400m vendor obligation
Deal comes less than year after increase in holding
Financial services and technology group Net1 says it has concluded a deal to reduce its shareholding in DNI-4PL Contracts (DNI) to settle a R400m vendor obligation.
The deal comes less than a year after it increased its stake in the company to 55% from 49%. At the time Net 1 said increasing its shareholding would result in the inclusion of DNI into the group's portfolio allowing it to accelerate its efforts to provide a range of low-cost products in areas such as financial services and telecommunications.
“The Net1 obligation of R400m relates to the settlement of a profit warranty to the original vendors of DNI, some of whom remain significant investors in DNI,” said Herman Kotze, CEO of Net1. Following the transaction Net1 now owns a 38% stake in DNI.
Founded in 2005, DNI, provides pre-paid airtime services and mobile subscriber starter packs.
“The sale of 17% of Net1's stake in DNI settles this obligation in full and removes R400m of debt from the Net1 balance sheet without affecting cash reserves,” Kotze said.
Net1 has its primary listing on the US Nasdaq Stock Exchange and also has operations in South Korea. It also has a 15% stake in struggling mobile network operator Cell C.
The company has faced headwinds to its SA operations in recent years including the loss of a multibillion-rand contract to distribute social grants.
Net1 said the loss of the SA Social Security Agency contract caused revenue from its subsidiary Cash Paymaster Services (CPS) to fall 81% in the fourth quarter of 2018.
In late January Net1 warned of its “significant loss” for the second quarter, after a ruling by the high court in Pretoria that “reversed a portion” of an interim order made in November 2018.
At the time, the court had directed Sassa to continue paying grants into the EasyPay Everywhere accounts of certain recipients.
The high court ultimately ruled that Sassa could continue migrating those grants to SA Post Office accounts.
Looking to the future “Net1 continues to review its various investments as part of the group's ongoing reorganisation,” said Kotze.