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Acquisitions | 12 Months Ended
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Jun. 30, 2018
Acquisitions [Abstract] |
Acquisitions | 3. ACQUISITIONS The cash paid, net of cash received related to the Company's various acquisitions during the years ended June 30, 2018, 2017 and 2016 is summarized in the table below:
|  | 2018 |  | 2017 |  | 2016
DNI(1) | $ | 6,202 | $ | - | $ | -
Masterpayment Financial Services Limited (formerly C4U-Malta Limited) ("Malta FS") |  | - |  | 2,940 |  | -
Pros Software Proprietary Limited ("Pros Software") |  | - |  | 1,711 |  | -
Transact24 Limited ("Transact24") |  | - |  | - |  | 1,666
Masterpayment AG ("Masterpayment") |  | - |  | - |  | 14,101
Total cash paid, net of cash received | $ | 6,202 | $ | 4,651 | $ | 15,767
(1) – represents the cash paid, net of cash acquired, to acquire a further 6% voting and economic interest, which resulted in the Company obtaining a controlling stake in DNI. As described below, the acquisition of DNI occurred in stages and DNI was accounted for using the equity method until June 30, 2018, being the point at which the Company obtained control over DNI. The total cash paid, net of cash acquired, to obtain a 55% voting and economic interest in DNI was $85.7 million. 2018 acquisition DNI The Company accounted for its interest in DNI using the equity method from August 1, 2017, until June 30, 2018, the date upon which it acquired further voting and economic interest in DNI, taking it to ownership of 55%. The transaction actually closed on June 28, 2018, however, for practical purposes the Company has used June 30, 2018, as the date from which it accounted for a controlling stake in DNI. Therefore, from June 30, 2018, the Company has consolidated DNI from June 30, 2018. Refer to Note 9, for additional information regarding DNI's contribution to the Company's reported results under the equity method. On July 27, 2017, the Company subscribed for 44,999,999 ordinary A shares in DNI, representing a 45% voting and economic interest in DNI, for a subscription price of ZAR 945.0 million ($72.0 million) in cash. On March 9, 2018, the Company subscribed for an additional 4,000,000 ordinary A shares in DNI for a subscription price of ZAR 89.3 million ($7.5 million), in cash, which increased its voting and economic interest in DNI to 49%, but did not give it control. On March 9, 2018, the Company also agreed to subscribe for an additional 6,000,000 ordinary A shares in DNI for an aggregate subscription price of ZAR 126.0 million ($9.2 million). The subscription was subject to certain suspensive conditions, including obtaining South African Competition Commission approval which was eventually obtained on June 21, 2018. Accordingly, on June 28, 2018, all conditions were met and the Company subscribed for 6,000,000 ordinary A shares in DNI for a subscription price of ZAR 126.0 million ($9.2 million) in cash, increasing its voting and economic interest in DNI to 55%. Under the terms of its subscription agreements with DNI, the Company has agreed to pay to DNI an additional amount of up to ZAR 400.0 million ($29.1 million, translated at exchange rates applicable as of June 30, 2018), in cash, subject to the achievement of certain performance targets by DNI. The Company expects to pay the additional amount during the first quarter of the year ended June 30, 2020, and has recorded an amount of ZAR 373.6 million ($27.2 million), in other long-term liabilities in its consolidated balance sheet as of June 30, 2018, which amount represents the present value of the ZAR 400 million ($29.1 million) to be paid (amounts translated at exchange rates applicable as of June 30, 2018). The present value of ZAR 373.6 million ($27.2 million) has been calculated using the following assumptions (a) the maximum additional amount of ZAR 400 million will be paid on August 1, 2019 and (b) an interest rate of 6.3 % (the rate used to calculate interest earned by the Company on its surplus South African funds) has been used to discount the ZAR 400.0 million to its present value as of June 30, 2018. Utilization of different inputs, or changes to these inputs, may result in significantly higher or lower fair value measurement. As described in Note 9, on March 9, 2018, the Company obtained financing to partially fund the acquisition of the additional ordinary A DNI shares and Net1 Applied Technologies South Africa Proprietary Limited ("Net1 SA") has pledged, among other things, its entire equity interest in DNI as security for the South African facilities described in Note 14. On March 9, 2018, the Company provided DNI with an interest-free loan of ZAR 126.0 million ($10.6 million) which was repayable at the earlier of June 30, 2018, or within twenty days of the 6,000,000 ordinary A share subscription agreement (i) becoming unconditional, (ii) lapsing because the Competition Commission prohibits the subscription, or (iii) the agreement being cancelled for any reason. As described in Note 9, on March 9, 2018, the Company obtained financing to provide the loan to DNI. On June 28, 2018, DNI repaid the ZAR 126 million ($9.2 million) loan in full and the Company used the proceeds from the repayment of the loan to fund the subscription for 6,000,000 ordinary A shares in DNI. The preliminary purchase price allocation of the DNI acquisition, translated at the foreign exchange rates applicable on the date of acquisition, is provided in the table below:
|  | DNI |
Cash and cash equivalents | $ | 2,979 |
Accounts receivable |  | 16,977 |
Inventory |  | 2,526 |
Property, plant and equipment |  | 1,317 |
Equity-accounted investment - Speckpack(Note 9) |  | 339 |
Goodwill (Note 10) |  | 114,161 |
Intangible assets (Note 10) |  | 104,003 |
Deferred tax assets |  | 561 |
Other long-term assets(1) |  | 21,348 |
Accounts payables and other payables |  | (20,914 | )
Income taxes payable |  | - |
Other long-term liabilities(1) |  | (8,291 | )
Deferred tax liabilities |  | (29,121 | )
Fair value of assets and liabilities on acquisition |  | 205,885 |
Less: fair value attributable to controlling interests on acquisition date |  | (94,123 | )
Less: fair value of equity-accounted investment, comprising: |  | (100,947 | )
Add: loss on re-measurement of previously held interest |  | 4,614 |
Less: Contingent payment recognized related to 49% interest acquired |  | (25,589 | )
Less: carrying value at the acquisition date (Note 9) |  | (79,972 | )
Less: Contingent payment recognized related to 6% interest acquired |  | (1,633 | )
Total purchase price | $ | 9,182 |
(1) –DNI concluded an acquisition in November 2017 and other long-term liabilities includes a contingent purchase consideration of ZAR 113.8 million ($8.3 million) due to the sellers and other long-term assets includes an amount due from the DNI shareholders, excluding the Company. DNI is obligated under the terms of this obligation to pay 50% of the purchase consideration plus or (less) a contingent amount (refund) calculated on a multiple of excess (deficit) earnings over (less) an agreed earnings amount. The other DNI shareholders have agreed to reimburse DNI the 50% consideration plus (less) the contingent amount (refund) payable in full. Therefore, other long-term asset includes the amounts due from the DNI shareholder, excluding the Company, and other long-term liabilities includes the contingent consideration due under the November 2017 acquisition. The Company expects DNI to pay, and to be reimbursed, the additional amount during the first quarter of the year ended June 30, 2020, which amount represents the present value of the ZAR 129.0 million ($9.4 million) to be paid (amounts translated at exchange rates applicable as of June 30, 2018). The present value of ZAR 113.8 million ($8.3 million) has been calculated using the following assumptions (a) the maximum additional amount of ZAR 129.0 million will be paid on August 1, 2019 and (b) an interest rate of 10.0 % (the rate used to calculate interest earned by DNI on its surplus South African funds) has been used to discount the ZAR 129.0 million to its present value as of June 30, 2018. Utilization of different inputs, or changes to these inputs, may result in significantly higher or lower fair value measurement. Pro forma results of operations have not been presented because the effect of the DNI acquisition was not material to the Company. During the year ended June 30, 2018, the Company incurred acquisition-related expenditure of $0.5 million related to this acquisition. The DNI acquisition closed on the last day of the Company's fiscal year and therefore it has not contributed to revenue and net income as a subsidiary for the year ended June 30, 2018. Refer to Note 9 for DNI's contribution to net income under the equity method. 2017 acquisitions Malta FS In November 2016, the Company acquired a 100% interest in Malta FS, a licensed Malta Financial Services Authority-supervised electronic money institution, for approximately €3.6 million ($3.9 million translated at the foreign exchange rates applicable on the date of acquisition). Malta FS' license has been passported across all member states of the European Union which allows Malta FS to operate in these territories. The Company plans to build and reinforce Malta FS such that it operates as the Company's principal regulated electronic money institution with the ability to cover all of the Company's financial services activities and business in the European Union. Pros Software In October 2016, the Company acquired a 100% interest in Pros Software, a software development and consulting services company based near Johannesburg, South Africa, for ZAR 25.0 million ($1.8 million, translated at the foreign exchange rates applicable on the date of acquisition). Pros Software performs software development and consulting services for a number of clients, including for the Company, and has a specialty practice in business intelligence. The final purchase price allocation of the Malta FS and Pros Software acquisitions, translated at the foreign exchange rates applicable on the date of acquisition, is provided in the table below:
|  | Malta FS |  |  | Pros Software |  |  | Total |
Cash and cash equivalents | $ | 999 |  | $ | 110 |  | $ | 1,109 |
Accounts receivable |  | 983 |  |  | 165 |  |  | 1,148 |
Property, plant and equipment |  | 30 |  |  | 9 |  |  | 39 |
Intangible assets (Note 10) |  | 1,078 |  |  | 2,311 |  |  | 3,389 |
Goodwill (Note 10) |  | 2,475 |  |  | - |  |  | 2,475 |
Accounts payables and other payables |  | (1,570 | ) |  | (58 | ) |  | (1,628 | )
Income taxes payable |  | - |  |  | (69 | ) |  | (69 | )
Deferred tax liabilities |  | (56 | ) |  | (647 | ) |  | (703 | )
Total purchase price | $ | 3,939 |  | $ | 1,821 |  | $ | 5,760 |
Pro forma results of operations have not been presented because the effect of the Malta FS and Pros Software acquisitions, individually and in the aggregate, were not material to the Company. During the year ended June 30, 2017, the Company incurred acquisition-related expenditure of $0.5 million related to the Malta FS and Pros Software acquisitions. Since the closing of the Malta FS acquisition on November 1, 2016, it has contributed revenue and a net loss after acquired intangible asset amortization, net of taxation, of $0.2 million and $0.7 million, respectively, for the year ended June 30, 2017. Since the closing of the Pros Software acquisition on October 1, 2016, it has contributed revenue and a net loss after acquired intangible asset amortization, net of taxation, of $0.5 million and $1.8 million, respectively, for the year ended June 30, 2017. 2016 acquisitions Transact24 Limited On January 20, 2016, the Company acquired the remaining 56% of the issued and outstanding ordinary shares of Transact24 for $3.0 million in cash and through the issue of 391,645 shares of the Company's common stock with an aggregate issue date fair value of approximately $4.0 million. Transact24 is a specialist Hong Kong-based payment services company. The Company acquired approximately 44% of Transact24 in May 2015. The Company elected to settle part of the purchase price in shares in order to appropriately align the T24 management team with the Company and its global strategy. The parties agreed that 50% of the Company's shares issued in the transaction were contractually restricted as to resale until after June 30, 2016, and the remaining 50% of the shares were so restricted until after June 30, 2017. Masterpayment AG In April 2016, the Company acquired a 60% interest in Masterpayment AG ("Masterpayment"), a specialist payment services processor based in Munich, Germany for approximately $9.4 million and paid a contractually agreed EBITDA earn-out of $5.4 million in June 2016, for a total purchase consideration of $14.8 million. The final purchase price allocation of the Transact24 and Masterpayment acquisitions, translated at the foreign exchange rates applicable on the date of acquisition, is provided in the table below:
|  | Transact24 |  |  | Masterpayment |  |  | Total |
Cash and cash equivalents | $ | 1,334 |  | $ | 665 |  | $ | 1,999 |
Accounts receivable |  | 2,019 |  |  | 765 |  |  | 2,784 |
Property, plant and equipment |  | 154 |  |  | 18 |  |  | 172 |
Deferred tax assets |  | 1,070 |  |  | - |  |  | 1,070 |
Intangible assets (Note 10) |  | 4,974 |  |  | 9,428 |  |  | 14,402 |
Goodwill (Note 10) |  | 6,024 |  |  | 17,084 |  |  | 23,108 |
Accounts payables and other payables |  | (1,898 | ) |  | (1,114 | ) |  | (3,012 | )
Deferred tax liabilities |  | (1,243 | ) |  | (2,236 | ) |  | (3,479 | )
Fair value of assets and liabilities on acquisition |  | 12,434 |  |  | 24,610 |  |  | 37,044 |
Less: fair value of equity-accounted investment, comprising: |  | (5,471 | ) |  | - |  |  | (5,471 | )
Less: gain on re-measurement of previously held interest |  | (1,908 | ) |  | - |  |  | (1,908 | )
Less: carrying value at the acquisition date |  | (3,563 | ) |  | - |  |  | (3,563 | )
Less: fair value attributable to controlling interests on acquisition date . |  | - |  |  | (9,844 | ) |  | (9,844 | )
Total purchase price | $ | 6,963 |  |  | 14,766 |  | $ | 21,729 |
Add: carrying value of non-controlling interests acquired |  |  |  |  | 9,867 |  |  |  |
Add: adjustment to Net1 equity (Note 15) |  |  |  |  | 1,322 |  |  |  |
Cash paid for non-controlling interest (Note 15) |  |  |  |  | 11,189 |  |  |  |
Total consideration paid for Masterpayment |  |  |  | $ | 25,955 |  |  |  |
Pro forma results of operations have not been presented because the effect of the Transact24 and Masterpayment acquisitions, individually and in the aggregate, were not material to the Company. During the year ended June 30, 2016, the Company incurred acquisition-related expenditure of $0.2 million related to these acquisitions. Since the closing of the Transact24 acquisition, it has contributed revenue and net income of $3.8 million and $0.03 million, respectively, for the year ended June 30, 2016. Since the closing of the Masterpayment acquisition, it has contributed revenue and net loss, after acquired intangible asset amortization, net of taxation, and a non-controlling interest, of $2.4 million and $0.04 million, respectively, for the year ended June 30, 2016.

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