Listed telecommunications company, Blue Label has offered to purchase approximately 35% of Cell C for R4 billion.
In a press statement, Cell C announced a proposed restructuring of the company’s capital that will reduce net debt from in the high double-digit numbers, to R8 billion or less when implemented.
The target is to reduce the debt further over the next 12 months, the operator said.
Blue Label Telecoms noted through a SENS announcement that it has submitted a conditional binding offer to the board of directors of Cell C.
The deal would see Blue Label Telecoms contribute R4 billion in a subscription for approximately 35% of Cell C’s total issued share capital at the conclusion of Cell C’s restructuring programme.
Cell C has also submitted a binding offer to co-invest in the company with Cell C’s current shareholder, 3C Telecommunications Proprietary Limited (3C Telecommunications) and Blue Label.
Cell C employees will then hold around 30% of the total issued share capital in Cell C at a cost of R2.5 billion at the conclusion of the restructuring programme.
If successful the restructuring will result in 3C Telecommunications holding 35%, Management and Staff 30% and Blue Label 35% of the ordinary shares in Cell C.
“The restructuring being proposed follows the tremendous growth and development we’ve successfully completed in the last three years. We’re now building a stronger and more sustainable growth platform while refinancing our debt in South African Rand on favourable terms,” said Cell C CEO, Jose Dos Santos.
“The restructuring will allow us to support our continued growth, network expansion and investment in data networks.”
“More importantly, should this transaction be approved it will become one of the largest employee ownership deals in the country. Through this transaction, we will see more employees of our company share in the success as they continue to deliver.”
The Board of Cell C and 3C will assess the offer from Blue Label [and Cell C employees].
The restructuring is subject to conditions precedent, including the execution of agreements typical of a restructuring of this nature and the obtaining of all requisite regulatory approvals.
The expected effective date of the restructuring is 1 June 2016.
Rationale for the Proposed Transaction
Blue Label said Cell C has delivered a positive turnaround in its financial and operational performance as the subscriber base increased from approximately 9 million subscribers in 2012 to more than 22 million subscribers to date.
Cell C’s network, currently comprising more than 4,600 sites, addresses South Africa’s core voice segments, with 98% of the population covered.
Cell C also offers 3G and LTE data services to subscribers.
Blue Label is a distributor of pre-paid airtime and secured electronic tokens of value in South Africa, India and Mexico.
“The Proposed Transaction provides a compelling value proposition to Blue Label, as well as to Cell C and its customers, through vertical integration affording both companies the opportunity to realise synergies in product distribution, and positioning Blue Label to benefit from the improved operational and financial performance that the combined platform would create,” Blue Label said.
Last month, Telkom announced that it terminated talks to acquire the full shareholding of Cell C from Oger Telecom.
Telkom officially confirmed it was in talks to acquire Cell C on 9 November, following reports that the group had offered as much as R14 billion for the mobile operator.
Bloomberg reported that Oger Telecom, which is Cell C’s major shareholder, rejected the offer from Telkom in October, with the Dubai based firm believed to be seeking R22 billion.