JSE-listed firm Blue Label Telecoms announced on Thursday that it is planning to buy 35% of Cell C. By Gugu Lourie
The transaction would see Blue Label Telecoms inject R4 billion in a subscription for 35% of Cell C’s total issued share capital at the conclusion of Cell C’s recapitalization programme.
The mobile phone operator said the recapitalisation programme will reduce Cell C’s net debt from the high double-digit numbers to a very manageable maximum of R8 billion or less when implemented.
The target is to reduce the debt further over the next 12 months.
The management on behalf of the employees of Cell C has also submitted a binding offer to co-invest in the mobile phone operator with Cell C’s current shareholder, 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 the recapitalisation programe is successful, 3C Telecommunications will hold 35% of Cell C, Management and staff 30% and Blue Label 35% of the ordinary shares in the company.
“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,” says Jose Dos Santos, Cell C CEO.
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.
Blue Label has, for a number of years, acted as a one of the primary distribution channels for Cell C’s products.
“This has resulted in the development of a strong relationship between Blue Label and Cell C. 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 informed investors on the JSE on Thursday.