As part of the transaction, Altech will take an 8,6% stake in Liquid, which operates fibre infrastructure, primarily in southern and central Africa. Liquid is majority owned by Econet Wireless Global, the company founded by Zimbabwean telecoms tycoon Strive Masiyiwa.
Altech’s East African operations have been struggling for years in a highly competitive market and have dragged heavily on the group’s performance. CEO Craig Venter said last year that fixing East Africa was his top priority.
Altech says the businesses have been affected negatively by the depreciating value of certain East African currencies, by network instability and reliability issues, as well as the loss of big telecoms clients choosing to build their own networks instead of relying on third-party suppliers.
Due to writedowns in goodwill and the carrying value of Altech businesses in both East and West Africa, Altech reported an accounting loss before tax in the six months to end-August 2012 of R485m.
Under the deal, Altech will sell its shares in its East African operation in return for an equity stake in Liquid. The sale is on a “net debt-free and cash-free basis” to Liquid.
Altech will buy additional new ordinary shares in Liquid for a cash consideration of US$16,5m. It intends to hold the stake as a “strategic minority interest shareholding”. As long as Altech continues to hold the shares, it will be entitled to 10% of all votes being cast at general meetings of ordinary shareholders of Liquid Telecom.
Altech will also be entitled to appoint one director to Liquid’s board but will not be entitled to receive dividends for 18 months after conclusion of the deal.
“Liquid’s controlling shareholders have indicated that Altech may be afforded the opportunity to increase its shareholding in Liquid, in the future, in order to enhance the strategic partnership between [the companies],” Altech says in a statement to shareholders.
Liquid operates fibre-optic networks in South Africa, Botswana, Lesotho, Zimbabwe, Zambia and the Democratic Republic of Congo.
Altech says the transaction will mean its pro-forma net asset value (NAV) per share will decline by 32%. Tangible NAV (the value of its assets less items such as goodwill, patents and trademarks) will go down by 52%. — (c) 2013 NewsCentral Media