SOUTH African fintech company Lesaka Technologies is acquiring southern Africa-focused payments processing firm, Adumo, for R1.6 billion in cash and shares.
Lesaka said yesterday it had reached an agreement to snap up Adumo, although it has yet to secure shareholder and regulatory approvals for the transaction.
“Lesaka has signed a definitive agreement to acquire Adumo for R1.59bn,” it said.
“The purchase consideration will be settled through the combination of an issuance of 17 279 803 shares of Lesaka common stock to Adumo’s current ultimate shareholders plus R232 million in cash.”
The cash payment component for the shares will be funded by internal cash resources and external financing, it added.
After consummation of the Adumo acquisition, Lesaka will have an ecosystem serving some 1.7 million active consumers and about 119 000 merchants.
This means the South African fintech will be processing more than R250bn in throughput comprised of R40bn in card payments, R100bn in VAS payments that include prepaid airtime, data, electricity, money transfers and DStv payments.
This acquisition also brings Lesaka’s total number of employees to over 3 300 across five sub-Saharan African countries – South Africa, Namibia, Botswana, Zambia, and Kenya.
Lesaka said the acquisition of Adumo reinforced its regional fintech consolidation position.
It also enhanced Lesaka’s positioning in the southern African region’s consumer and merchant payments markets, especially following the integration of the Connect and Kazang businesses as well as the recent acquisition of Touchsides.
In the quarter to end-December 2023, Lesaka generated R2.7bn in revenues and narrowed down its loss for the period by about 56% to R50.8m.
The JSE=listed firm has been expanding its portfolio through acquisitions after it acquired Touchsides, a data and markets insights company from Heineken in February as it pursued retention of the global brewer’s South African unit as a client.
“Adumo’s customer base provides us access to more than 245 000 consumers and to payment technologies that we can incorporate into our existing operations,” said Lincoln Mali, CEO of Lesaka Southern Africa.
“The pending acquisition of Adumo is another significant milestone for Lesaka as we build the top fintech platform in southern Africa.”
Adumo is owned by Apis Growth Fund I, a private equity fund managed by Apis Partners, the African Rainbow Capital which is the largest shareholder of Crossfin Holdings and the International Finance Corporation, as well as Adumo management.
Adumo co-founder and CEO, 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,” Kent said.
“Our combined offering will significantly enhance the customer value proposition, and it is a natural fit considering our respective strengths and technology offerings.”
Adumo, with 23 000 active merchants, primarily operates in the integrated payments industry with services encompassing card acquiring and reconciliation services.
It processes over R24bn per year.
“The augmentation of product offerings broadens our value proposition and enhances our ability to be disruptive and solve our merchants’ pain points,” said Steve Heilbron, the head of corporate development for Lesaka.
In the three months to December, the leap in Lesaka’s revenues was attributed to firming up demand for low-margin prepaid airtime sales as well as additional value-added services, lending income and insurance.
Although the company had projected a tough operating environment in South Africa, it is hopeful that support for its businesses will emanate from “supplier payments” as well as “continued adoption of cards payments” in the South African economy.
Nonetheless, the credit business had negatively been “affected by high interest rates”, resulting in fewer and smaller extensions.
BUSINESS REPORT