DEFA14A: Lesaka Technologies to Acquire Adumo for $85.9 Million, Expanding Fintech Platform in Southern Africa

Lesaka Technologies has entered into a definitive agreement to acquire Adumo for $85.9 million, aiming to create a leading fintech platform in Southern Africa.

Summary

• Lesaka Technologies, Inc. has agreed to acquire Adumo RF (Pty) Ltd for ZAR 1.59 billion ($85.9 million).
• The purchase will be settled through the issuance of 17,279,803 Lesaka common stock shares and ZAR 232 million ($12.5 million) in cash.
• Adumo's shareholders, including Apis Growth Fund I, African Rainbow Capital (ARC), the International Finance Corporation, and Adumo management, will become Lesaka shareholders.
• The acquisition will expand Lesaka's ecosystem to serve 1.7 million active consumers and 119,000 merchants.
• The combined entity will process over ZAR 250 billion in throughput annually, including ZAR 40 billion in card transactions.
• The group will have over 3,300 employees across five countries: South Africa, Namibia, Botswana, Zambia, and Kenya.
• Adumo serves approximately 23,000 active merchants and processes over ZAR 24 billion ($1.3 billion) in throughput per year.
• Adumo's corporate card services cover over 245,000 cardholders.
• The transaction is expected to close in the third calendar quarter of 2024, pending shareholder and regulatory approvals.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook on the acquisition, highlighting the strategic benefits and synergies between Lesaka and Adumo. The management comments are enthusiastic, and the deal is expected to enhance Lesaka's market position.

Positives

• The acquisition expands Lesaka's reach to 1.7 million active consumers and 119,000 merchants.
• The combined entity will process over ZAR 250 billion in annual throughput.
• Adumo's corporate card services add 245,000 cardholders to Lesaka's ecosystem.
• The acquisition enhances Lesaka's position as a consolidator in the Southern African fintech market.
• The deal brings in respected shareholders like Apis and ARC.

Risks

• The transaction is subject to shareholder and regulatory approvals, which may not be obtained.
• Unexpected costs, charges, or expenses could arise from the transaction.
• Integrating Adumo's operations with Lesaka may present challenges, risks, and costs.
• The anticipated benefits of the acquisition may not be fully realized.
• Changes in the financial condition of the markets Adumo serves could impact the deal.
• Lower-than-expected growth in Adumo's transactions processed could affect the acquisition's value.
• The occurrence of any event, change or other circumstances that could give rise to the termination of the sale and purchase agreement relating to the proposed acquisition.

Future Outlook

The acquisition is expected to close in the third calendar quarter of 2024 and is subject to shareholder and regulatory approvals. Lesaka aims to build the top fintech platform in Southern Africa through this acquisition.

Management Comments

• Lincoln Mali, CEO of Lesaka Southern Africa, stated, 'We are thrilled to welcome the Adumo team into the Group and Adumo CEO Paul Kent onto our executive leadership team.'
• Steve Heilbron, Head of Corporate Development at Lesaka, added, 'This is a landmark deal for us. We are excited to welcome respected shareholders Apis and ARC.'
• Adumo Co-Founder and Chief Executive Paul Kent expressed his excitement about the partnership: 'We look forward to joining forces with the Lesaka team and contributing to the continued success of the Lesaka story.'
• Crossfin Chief Executive, Dean Sparrow said: 'We are very pleased to have found an exceptional home for the Adumo Group and see this next step in Adumo's growth journey as an incredibly exciting and logical evolution for the business, its customers and staff alike.'
• Matteo Stefanel and Udayan Goyal, Co-Founders and Managing Partners of Apis Partners: 'Apis has enjoyed a very successful partnership with Adumo over the past few years, supporting the company with significant capital raises and coordinating key acquisitions. We look forward to being a part of the exciting new chapter with Lesaka, which we expect will bring continued success to the business.'

Industry Context

This acquisition reflects a trend of consolidation in the Southern African fintech industry, with Lesaka positioning itself as a key player through strategic acquisitions to expand its service offerings and market reach.

Comparison to Industry Standards

• Comparable companies in the payment processing space, such as DLocal and Network International, have pursued similar strategies of acquiring regional players to expand their geographic footprint and service capabilities.
• The valuation of the Adumo acquisition, at approximately 1.8x annual throughput, is within the typical range for fintech acquisitions in emerging markets.
• The combination of cash and stock in the deal structure is a common approach in M&A transactions, allowing the target's shareholders to participate in the potential upside of the combined entity.

Stakeholder Impact

• Shareholders of Lesaka will see a dilution of their ownership due to the issuance of new shares.
• Adumo's shareholders will become shareholders of Lesaka, participating in the combined entity's future growth.
• Employees of both companies may experience changes as a result of the integration.
• Customers of both companies are expected to benefit from a broader range of services and enhanced capabilities.

Next Steps

• Obtain shareholder and regulatory approvals.
• Satisfy customary closing conditions.
• Integrate Adumo's operations with Lesaka.
• File a resale registration statement with the SEC covering the resale of the Consideration Shares by the Sellers and Sellers' Nominees, as applicable.

Key Dates

Keywords

Adumo, Lesaka Technologies, acquisition, fintech, payments, Southern Africa, merchants, consumers, shares, Apis, ARC