Lesaka Technologies shares leap on JSE after acquisition of Heineken unit

The shares later closed 1.26% up at R68.97 on the JSE yesterday.

Lesaka, with a market cap of R3.7 billion, is bumping up its presence across South Africa’s informal sector. Its announcement of the acquisition of 100% of Touchsides from Heineken International further cements its strategy to increase its presence across taverns, spazas and other informal businesses.

The acquisition also adds to Lesaka’s earlier acquisition of Kazang, a complementary services and payments platform for spaza shops and other small-scale to medium South African businesses.

The acquisition of Touchsides is expected to “significantly” deepen Kazang’s footprint across South Africa’s taverns industry. With an active base of over 10 000 point-of-sale terminals across South Africa’s informal licensed taverns, the platform processes more than 1.5 million transactions per day.

Among other use cases, Touchsides provides platform-as a-service (PaaS) and software-as-a-service (SaaS) solutions to licensed tavern outlets, enabling the measurement of sales activity in real time, management of stock levels and informing commercial decisions, such as pricing and promotional offers.

Data and insights gathered from the platform is of significant value and potential for monetisation through further downstream relationships with a range of clients, including fast-moving consumer goods companies, retailers, wholesalers, route-to-market suppliers, and financiers.

“With its installed network and deep data and insight capabilities, we expect to have a strong platform to better understand and further penetrate South Africa’s informal markets. Touchsides is an exciting acquisition target and aligns perfectly with our strategy of adding scale and broadening our service offering in our Merchant division,” Steve Heilbron, the head of merchant division for Lesaka, said.

The licensed tavern market in South Africa “consists of an estimated 45 000 establishments” and is a “major vertical” in South Africa’s informal market.

“We have identified multiple growth levers from this acquisition that we are ready to execute on,” added Heilbron.

“Operating as an independent company unaffiliated to a major beverage supplier, we see a distinct opportunity to significantly grow Touchsides’ tavern base and to monetise its real-time data.”

The acquisition of Touchsides will also be expected to leverage on its data monetisation experience and point-of-sale expertise across Lesaka’s large informal merchant base outside of the tavern industry.

Lesaka will fund the acquisition from cash generated internally across the group, it said. It expects the acquisition to be completed by the end of next month.

Under terms of the acquisition, Heineken’s operating business in South Africa agreed to a long-term renewable contract with Touchsides for access to Touchsides tavern data and services.

For the three months to the end of September, Lesaka raised revenues by 19% to R2.5bn on a year-on-year basis. The surge in revenue was attributed to firming up demand for low-margin prepaid airtime sales as well as additional value-added services, lending income and insurance.

Operating income for the period amounted to R4.2 million as it swung from an operating loss of R80m in the same period a year earlier. This helped Lesaka to narrow down its net loss from R183m to R105.6m.

In December, the company announced that Chris Meyer, its CEO for three years, would be stepping down at the end of this month. Additionally, it said Ali Mazanderani had been appointed to the post of executive chairperson effective the beginning of this month.

“The consumer division has returned to profitability and the Connect Group acquisition has been a resounding success. Furthermore, we have built a strong leadership team, implemented a robust corporate governance and risk management framework, and developed a values system,” Meyer said in December.