Blu Label Unlimited made the long-expected announcement on Wednesday of its intention to list Cell C Holdings on the main board of the JSE.
The stock market floatation will test investor appetite for another telecom share on the exchange. Telecom has, in recent years, offered varying fortunes for investors. While Vodacom has developed into a steady growth stock, offering a constant dividend, MTN and Telkom have offered outsized returns that have come at the price of volatility. Dividends for the latter two have seen cuts in recent years, balanced by the potential for large stock movements.
The listing of Cell C will involve an offering of existing shares by The Prepaid Company (TPC), a wholly owned subsidiary of Blu Label, by way of a private placement to qualified investors, subject to market conditions and to JSE approval.
Together with the listing, an offer will be made for the sale of shares held by TPC to selected prospective investors, intended to raise gross proceeds of about R7.7bn and the allocation of R2.4bn of shares to an empowerment vehicle.
As part of the steps to prepare for the listing, TPC is buying out Nedbank’s 7.53% stake and Lesaka’s 5.13% stake in Cell C. In addition, TPC has taken on Nedbank’s debt claims against Cell C. These will then be converted into equity. The effect of this is a R1.301bn reduction in Cell C’s debt to R2.75bn.
Application will be made to admit the shares to listing and trading on the JSE in the telecommunications services sub-sector of the JSE.
At the date of listing, Cell C group will comprise Cell C Holdings and its subsidiaries, including Cell C and Comm Equipment.
Cell C CEO Jorge Mendes said the decision to pursue a listing on the JSE marked a significant and exciting step in Cell C’s growth story.
“While Cell C is already owned by a listed entity and has operated within that framework, the separate listing of the company will enable the group to streamline its balance sheet, reinforce its growth strategy and strengthen its competitive positioning of business segments.
“The listing is expected to be an enabler of our strategy as it will elevate the Cell C brand, enhance access to capital to sustain growth, instil public transparency and market discipline, and enhance the group’s profile with all stakeholders,” Mendes said.
Ahead of the much anticipated initial public offering (IPO), the group has undergone restructuring to facilitate the separation of Cell C from Blu Label through the formation of the consolidated group for purposes of the listing.
The restructuring would also greatly simplify Cell C’s capital structure, ensuring the group was well positioned to achieve future success in the publicly listed environment, it said on Wednesday.
In September, the Competition Tribunal approved Blu Label’s bid to take control of Cell C, receiving conditional approval to acquire an additional 4.04% shareholding in the mobile provider from Cedar Cellular Investments 1. This pushed up Blu Label’s stake, held through TPC, to 53.57%.
The effect of the prelisting transactions would take the economic interest to 93%. Having received approval from the tribunal, that economic interest becomes voting control.
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