Telkom has advised its shareholders that it is in discussions regarding the potential acquisition of Cell C.
In a shareholder announcement on Friday (15 November), the group said that it has ‘substantially concluded its due diligence, however discussions are at a preliminary stage’.
“The potential acquisition will be subject to Cell C completing a financial restructuring to ensure that its gearing levels are reduced to a sustainable level as specified by Telkom and commercial contractual relationships are renegotiated to terms acceptable to Telkom. The Potential Acquisition will be subject to a number of regulatory approvals, it said.
“The potential acquisition, if concluded, may have a material effect on the price of the Company’s securities. Accordingly, shareholders are advised to continue to exercise caution when dealing in the Company’s securities until a further announcement is made.”
The approach comes as Cell C explores options with MTN and local investors known as the Buffett Consortium to recapitalise the company, which may include the sale of some of its assets, Bloomberg reports.
The two offers will be considered side-by-side as Cell C and its owners try to restructure R9 billion ($606 million) of debt.
Talks with MTN are at an advanced stage, Cell C said in an emailed statement on Tuesday, declining to comment on Telkom.
“Cell C remains focused on ensuring operational efficiencies, restructuring its balance sheet, implementing a revised network strategy and improving overall liquidity,” the company said.
“Cell C will look at any opportunity that will assist with the company’s long-term viability. Any opportunity will need to undergo a due-diligence process that takes into account all stakeholders.”
Operator Cell C confirmed in a statement that it received a non-binding offer from Telkom.
“Cell C remains focused on ensuring operational efficiencies, restructuring its balance sheet, implementing a revised network strategy and improving overall liquidity.
“It confirms previous market communication that negotiations for an expanded roaming agreement are at an advanced stage.
“Independent financial and legal advisers have been appointed representing the lenders and constructive discussions on the recapitalisation are underway with them and other stakeholders in respect of various proposals,” it said.