South Africa's Blue Label Telecoms has agreed to pay ZAR 5.5 billion to acquire 45 percent of mobile operator Cell C. The company said that it will increase its stake in Cell C from the 35 percent it originally announced in December 2015. Blue Label, through its wholly owned subsidiary The Prepaid Company Proprietary (TPC), has agreed with Cell C, 3C Telecommunications Proprietary (3C), Albanta Trading 109 Proprietary (MS15) and senior management of Cell C (MS10) to participate in the recapitalisation of Cell C, which, if successfully completed, will result in TPC holding 45 percent of the operator for a total consideration of ZAR5.5 billion.
The Cell C recapitalisation will result in its existing net borrowings, including shareholder loans, less cash and cash equivalents, being reduced to a maximum of ZAR 8.0 billion. The deal is part of Cell C’s efforts to pay down debts which forced it into a restructuring with bondholders in 2015, involving a three-year maturity extension to July 2018. On top of the 45 percent stake owned by Blue Label, Cell C plans to issue new shares to staff, senior management and existing shareholders to help reduce debt.
Blue Label said it would structure the ZAR 5.5 billion payment through ZAR 3.5 billion of its own available cash and another ZAR 2 billion from Net11 UEPS Technologies. Net1 agreed to buy 117.9 million shares in Blue Label, at a subscription price of ZAR 16.96 per share, giving it a 15 percent stake in the company. Net1 said it expects to settle the subscription through a combination of cash resources, debt instruments and the issue of 5 million shares at USD 9.00 per share. The acquisition will give it the right to name one director on Blue Label's board.
The company said the Cell C/Blue Label deal will provide an opportunity for all three companies to extend their reach in South Africa. The deal is awaiting shareholder approval and a number of other conditions that need to be met by Cell C.
The effective date of the proposed transaction will be 18 November. Blue Label has, for a number of years, acted as one of the primary distribution channels for Cell C. This has resulted in the development of a strong relationship between Blue Label and Cell C.
