DEF 14A: Lesaka Technologies to Acquire Adumo in Share and Cash Deal

Lesaka Technologies is set to acquire Adumo, a Southern African payments platform, through a combination of stock issuance and cash payment, pending shareholder and regulatory approvals.

Summary

• Lesaka Technologies, Inc. has announced its plan to acquire Adumo, a payments and commerce enablement platform in Southern Africa.
• The acquisition will be executed through Lesaka's subsidiary, Lesaka Technologies (Pty) Ltd.
• The purchase consideration includes the issuance of 17,279,803 shares of Lesaka's common stock and a cash payment of ZAR 232 million ($12.5 million as of May 7, 2024).
• Lesaka is seeking shareholder approval for the share issuance at a special meeting scheduled for August 21, 2024.
• The transaction is expected to close in the second quarter of fiscal year 2025, subject to customary closing conditions and regulatory approvals.
• Post-acquisition, the Lesaka ecosystem will serve 1.7 million active consumers and 119,000 merchants, processing over ZAR 250 billion in throughput annually.
• The combined entity will have over 3,300 employees operating in South Africa, Namibia, Botswana, Zambia, and Kenya.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the acquisition, highlighting the strategic benefits and growth opportunities. However, it also acknowledges potential risks and challenges, resulting in a moderately positive sentiment score.

Positives

• The acquisition is expected to strengthen Lesaka's position as a leading fintech company in Southern Africa.
• The combined entity will serve a large customer base and process significant transaction volumes.
• Adumo's corporate card services cover over 245,000 card holders.
• Adumo ISV is the largest point of sale (POS) and Software-as-a-Service solutions provider to the hospitality sector in Southern Africa.

Negatives

• The issuance of Consideration Shares to the Sellers will dilute Lesaka's current shareholders.
• The integration of Adumo with Lesaka could subject Lesaka to liabilities that may exist at Adumo, including liabilities arising out of the Acquisition.
• The Acquisition is subject to the direct and/or indirect shareholders of CATS, or Lesaka if such shareholders fail to do so, providing written unconditional undertakings to purchase an amount of shares equal to the Replacement Cash Component.
• The Acquisition is subject to approval of Competition Authorities in South Africa and Namibia.
• The possibility of encountering difficulties in achieving, or failing to achieve, anticipated synergies in the amounts estimated or in the time frame contemplated.
• Increasing competition in the Southern African payments landscape.
• The risk of losing key Lesaka or Adumo management or employees during the Gap Period (as defined elsewhere in this proxy statement) of the Acquisition and thereafter.
• The terms of the Purchase Agreement that restrict Lesaka's ability to engage in certain transactions and initiatives.
• The possible volatility of the trading price of Lesaka's common stock resulting from the announcement, pendency or completion of the Acquisition.

Risks

• The acquisition may not be consummated if the conditions are not satisfied or waived.
• The acquisition may be completed even if a material adverse event occurs.
• The cash component of the purchase consideration is subject to a leakage settlement mechanism.
• Adumo's obligations and liabilities may be greater than anticipated.
• If the acquisition is not completed, Lesaka's stock price may decline.
• The market price of Lesaka's common stock may decline as a result of the acquisition.
• Lesaka and Adumo may not be able to enter into a business combination with another party on more favorable terms because of restrictions in the Purchase Agreement.
• The lack of a public market for Adumo's capital stock makes it difficult to evaluate the fair market value of Adumo's capital stock.
• Lesaka and Adumo may become involved in securities litigation or shareholder derivative litigation in connection with the Acquisition contemplated by the Purchase Agreement and this could divert the attention of our and Adumo management and harm the combined company's business, and insurance coverage may not be sufficient to cover all related costs and damages.

Future Outlook

Lesaka anticipates that the acquisition will be consummated during the second quarter of fiscal 2025, but cannot predict the exact timing.

Management Comments

• Lesaka is excited about the opportunities that the acquisition of Adumo bring to its shareholders, and thanks you for your consideration and continued support.
• We believe the acquisition will strengthen our position as one of Southern Africa's leading fintech companies.

Industry Context

The acquisition reflects a trend of consolidation in the Southern African fintech sector, with Lesaka aiming to expand its product suite and geographical reach.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards.
• However, it positions Lesaka as aiming to be a leading fintech platform in Southern Africa, suggesting a benchmark against other major players in the region.
• Adumo's throughput of ZAR 24 billion per year can be compared to other payment processors in the region to assess its market position.

Stakeholder Impact

• Shareholders of Lesaka will experience dilution due to the issuance of new shares.
• Merchants and consumers in Southern Africa are expected to benefit from an enhanced fintech platform.
• Employees of both Lesaka and Adumo may experience changes as a result of the integration.

Next Steps

• Lesaka will hold a Special Meeting of Shareholders on August 21, 2024, to approve the share issuance.
• Lesaka and Adumo will work to obtain regulatory approvals in South Africa and Namibia.
• The companies will proceed with integrating their operations following the closing of the acquisition.

Key Dates

Keywords

Acquisition, Adumo, Lesaka Technologies, Fintech, Merger, Share Issuance, Payments Platform, South Africa