Blue Label Telecoms continues to advance its plans to list Cell C on the JSE, releasing details on Monday of how it intends to restructure its operation and that of SA’s fourth-largest mobile provider in preparation.
In May, Blue Label announced plans to spin off Cell C as part of the group’s restructuring in a move that would result in all four of SA’s largest telecom companies being listed on the local bourse.
On Monday, the group said it had entered into a binding implementation agreement relating to the prelisting restructuring, which encompasses various transactions aimed at optimising Cell C’s capital structure and balance sheet in preparation for a separation and listing of the Cell C ListCo business.
The prelisting restructuring includes the following key elements:
- The conversion of various claims totalling R3.67bn held by The Prepaid Company (TPC) against Cell C into Cell C equity shares.
- The transfer of 100% of the shares in Comm Equipment Company (CEC) by TPC to Cell C in exchange for Cell C shares at R2.15bn.
- The transfer of airtime with a sales value of R7.3bn-R7.5bn from TPC to Cell C in exchange for Cell C equity shares.
- The acquisition by TPC of the shares in Cell C held by SPV4 and SPV5 in settlement of the debt obligations of those entities to TPC.
- The Cell C ListCo flip-up, whereby Cell C shareholders will exchange their Cell C shares for Cell C ListCo shares in preparation of the future listing of Cell C.
Cell C has long harboured ambitions of going public — a plan first floated by former CEO Jose Dos Santos in 2018. However, this plan came to naught as the company struggled to make a profit — making its initial public offering (IPO) a challenging prospect for investors.
Blue Label owns 100% of TPC, which owns 100% of CEC and 49.53% of Cell C.
The various parties are seeking to implement the prelisting restructuring to facilitate a separation and potential listing of a newly incorporated holding company of Cell C on the JSE main board.
Last month, the Competition Commission gave the green light for Cell C to acquire CEC, a company specialising in services for contract customers, from Blue Label.
Subject to market conditions as well as shareholder, regulatory and board approvals, it is expected that simultaneously with the listing TPC will make an offer for the sale of a portion of its shares in Cell C ListCo to qualifying investors (the sell-down) after the implementation of the prelisting restructuring.
Blue Label, valued at about R11.7bn, said it had been considering various strategic options and initiatives to unlock and deliver value to its shareholders.
The prelisting restructuring, Cell C listing and sell-down were expected to deliver significant benefits for Blue Label, its shareholders and Cell C, it said.
Should the prelisting restructuring be implemented, it will facilitate a separation of Cell C and the potential Cell C listing, allowing investors to independently assess the value and strategic focus of each business.
After the implementation of the prelisting restructuring, Cell C will be structured to facilitate the Cell C listing.
The listing is expected to deliver big benefits, such as providing Cell C with access to capital markets independently, a lever it may use to support further growth and to finance acquisitions or investments and to elevate its brand.
After the prelisting restructuring Blue Label was expected to own a significant majority of the shares in Cell C ListCo via TPC, though TPC’s shareholding in Cell C would decrease pursuant to the sell-down, it said.
For Blue Label, the conclusion of the transaction is expected to simplify what many consider a complex operating structure. The separation will also allow Blue Label investors to assess the group based on its core prepaid business.
News of the Cell C listing has helped to boost Blue Label’s share price, which is up about 120% so far this year. On Monday the share price gained 3.81% to R12.82.
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