Vodacom acquired a 51% equity interest in IoT.nxt for a maximum consideration of R1.028 billion, of which R469 million was settled in cash, on 23 August 2019.
The remainder of the money, outside of the R469 million in cash, is contingent on the future performance of the business.
The deal includes R590 million of goodwill and a trademark of R13 million recognised with the acquisition of IoT.nxt.
IoT.nxt was founded by Nico Steyn in 2015 and quickly grew to become a leading provider of IoT solutions in South Africa.
Vodacom CEO Shameel Joosub said the acquisition will help the mobile operator to enhance its IoT offering.
He explained that IoT.nxt offers unique edge technology and a tech-agnostic platform which can play a significant role in solving the challenges of legacy systems that have integration limitations.
This acquisition, Joosub said, will position Vodacom well in being the digitalisation partner of choice for customers.
Steyn previously told MyBroadband that the acquisition of the company will not change the way it operates, and they will maintain their agility in the market.
IoT.nxt currently has numerous clients in the South African IT and telecoms market, including Telkom, Cell C, Fastnet, and T-Systems.
Besides a capital injection, the deal with Vodacom will give the company strategic leverage which include access to Vodacom and Vodafone’s global operations.
This also gives IoT.nxt the ability to grow its international footprint.
It launched services in the US at the end of October 2018, and had secured a contract to provide IoT solutions to schools in Hillsborough County, Florida.
The county includes the city of Tampa, and the project sees IoT.nxt installing LED lighting in schools and IoT solutions which monitor and control heating, air conditioning, and ventilation (HVAC) systems.
Africa Analysis said the R1.028 billion paid by Vodacom for 51% equity in IoT.nxt is surprising.
“The surprise element is based on the fact that the value of projects undertaken by IoT.nxt to date does not support this valuation,” Africa Analysis said.
“The purchase price must have been based to a degree on anticipated future revenue flow, given IoT market expectations.”
Africa Analysis added that it is difficult to unpack this deal’s valuation drivers, but it does seem that Vodacom may have paid a premium for the equity.
“There is still some hype around IoT which may have influenced the price tag,” Africa Analysis said.