Net1 to Pay Departing CEO Belamant $8 Million, Share PremiumBy , , and
Shareholder Allan Gray says ‘outraged’ over CEO payments
Asset manager says payout is ‘unjustified’ and ‘extravagant’
Net1 UEPS Technologies Inc. said it’s agreed to pay its founder and chief executive officer $8 million and about a 14 percent premium on his shares after he agreed to step down amid a storm of controversy over a contract it holds in South Africa to distribute billions of dollars of welfare payments to 17 million people.
Serge Belamant will also be paid $50,000 a month to consult for the company after his early retirement, the company said in a disclosure to the U.S. Securities and Exchange Commission on Tuesday. Net1 agreed to buy back over 1 million shares he owns at $10.80 a share. It also agreed to allow the accelerated vesting of 200,000 shares and the repurchase of more than 252,000 “in-the-money” stock options at $10.80 a share minus the applicable exercise price per option. Its two biggest shareholders were unaware of the payout.
“Allan Gray notes with outrage the financial settlement claimed by Serge Belamant upon his retirement as CEO of Net1,” the Cape Town-based asset manager, which is Net1’s second-biggest shareholder with a 16 percent holding, said in an emailed statement on Wednesday. “We are very surprised that Belamant was able to negotiate such an extravagant deal after such broad public censure and believe that it is unjustified given current circumstances.”
Net1 won a contract in 2012 to distribute welfare in South Africa. Two years later, the country’s Constitutional Court ruled the contract invalid and instructed the South African Social Security Agency to find a new provider. When it failed to do so by March this year, the court allowed the contract to be extended until 2018 under stringent conditions.
“For a number of years we have been concerned about multi million rand ex-gratia severance payments made to executives and that shareholders are unable to block such payments,” Allan Gray’s chief investment officer, Andrew Lapping, said in the statement. The asset manager “made the recommendation that material severance payments to executives should be subject to a binding vote by shareholders,” he said.
“As our proposals have not been implemented and we were not privy to the negotiation with Belamant, we regret the settlement reached,” Lapping said.
The company’s biggest shareholder, the International Finance Corp. with a 17 percent stake, said it was also unaware.
“IFC learned of the terms of the CEO’s departure at Net1 like other shareholders, through public disclosure,” the private investment arm of the World Bank said in an emailed response to questions. “IFC is frustrated with the situation in which the board finds itself. IFC has been deeply concerned with the governance issues at Net1.”
Net1 has been accused by human-rights organizations of selling goods and services to South Africa’s poorest and least-educated ranging from loans to mobile-phone airtime without explaining the terms and costs adequately and by improperly using information gleaned from its grant distribution activity. It has denied the allegations.
The stock traded at $9.35 in New York as of 12:48 p.m. local time. It has declined more than 40 percent over the past two years.