IHS is afraid that MTN, one of its largest shareholders, could team up with another investor or parties to launch a hostile takeover of the Nigerian tower business.
Tension continues to mount between MTN and IHS Towers. Earlier this week, Africa’s largest cellphone network provider issued a strongly worded statement, calling out “governance concerns at IHS”.
The mobile operator wants to have a greater say about IHS’s activities. It drafted a proposal to align its 26% equity stake and voting rights — capped at 20% — that failed to be put to a vote at IHS’s AGM. MTN accuses IHS management of intentionally holding back on notifying other shareholders about the proposal.
In response, IHS Towers hit back saying a proposal drawn up by the mobile operator to have a greater say in how the tower business is run isn’t in its best interests. It has also rejected a call by MTN to convene an emergency meeting of shareholders, saying the company doesn’t have the authority to do so.
Business Day understands that behind the scenes, IHS CEO Sam Darwish believes that if the MTN and Wendel resolutions are passed by shareholders, MTN could be well placed to take over control of the company. This is according to people familiar with the matter.
A hostile takeover refer is a corporate acquisition that is not supported by the target company's management. The acquiring company makes an offer to purchase the target company’s shares directly from the shareholders, bypassing the target company’s board of directors.
Earlier in the month, the tower operator's recently held AGM devolved into a tense standoff over investor power after it dismissed demands from two of its largest stakeholders.
Wendel — a French investment group — and MTN, which together own about 45% of the company, argue that all shareholders with at least a 10% stake should have the power to nominate board members.
MTN is understood to be worried about capital allocation at IHS and paying high prices for assets as the tower company looks to diversify away from Nigeria to markets such as the Gulf Co-operation Council (GCC), a political and economic alliance of six Middle Eastern countries — Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman.
Lathams and JPMorgan have been appointed as defence advisers by IHS’s board.
MTN is IHS’s largest customer with the cellphone company having sold its network towers — and leasing them back — in its various markets.
In October 2021, IHS listed on the New York Stock Exchange. At the time, MTN owned about a third of the company and was thought to be in line for bumper payday by selling down the investment.
By June 2021, the group estimated the value of that 29% equity at R30.5bn. Selling down the stake, plus other moves such as repatriation of funds from Nigeria, were billed as ways to eliminate MTN’s debt.
However, market conditions have seen IHS lose half its value since listing. Having debuted at $16.69 a share, it now trades at $8.59. And even with a weaker rand, MTN’s stake in IHS, now at 26%, is worth about R14bn.
Similar market conditions scuppered Telkom’s efforts to list its tower business, Swiftnet, on the JSE a few months later, in early 2022. Telkom had valued the unit at R13bn but failed to get even three-quarters of that when testing the market.
Because of the underperforming share price, MTN says it has not been able to dispose of the nonvoting portion of its shares in IHS and remains unable to vote all of its shares.
MTN has called for an emergency meeting of IHS investors, but has been rebuffed.
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