Blue Label Telecoms, the company that is in the throes of acquiring a significant minority stake in mobile operator Cell C, said on Tuesday that it plans to spend R1.9bn on a separate but ultimately related acquisition — of smartphone distributor 3G Mobile.
Blue Label and its wholly-owned subsidiary The Prepaid Company will acquire 3G Mobile from its shareholders Wild Rose Capital, Newshelf 1312, Malewell Investments, Investec Bank, Jonathan Beare and DBF Capital Partners.
The shares in 3G Mobile will be acquired in two stages, with the initial acquisition by The Prepaid Company of 47.4% of 3G Mobile for R900m, subject to conditions, including the successful conclusion of a due diligence investigation. The remaining 52.6% will be acquired for R1bn.
Blue Label said 3G Mobile is one of Africa’s largest distributors, and financiers, of mobile devices and handsets to major retailers and cellular network providers.
It operates in eight African countries, with offices in South Africa, Namibia, Botswana, Mauritius and distribution channels into Zambia, Zimbabwe, Swaziland and Lesotho.
It reported a net profit after tax in the year ended 31 December 2016 of R248m, after adjusting for non-recurring expenditure. It will have a tangible net asset value of at least R1bn at the time the deal is expected to go through, Blue Label said.
“It has distribution rights for all major tier-one and tier-two mobile device and handset manufacturers, including Apple, Samsung, Huawei, Hi-sense, ZTE and Nokia,” Blue Label said.
3G Mobile, through subsidiary Comm Equipment Company, provides financing of the mobile handset component of post-paid contracts to cellular network providers, including Cell C. This business’s finance book is about R3bn.
Blue Label said it intends using 3G Mobile as its “expansion platform into the financing and supply of mobile devices, handsets and allied products”.
“Both functions supplement Blue Label’s strategic objective to provide value-added services to both Cell C and its own customer base,” it said.
“3G Mobile provides the ideal platform to consolidate Blue Label’s low-cost and certified pre-owned mobile handset divisions into a consolidated group. The resultant acquisition is earnings accretive and provides a solid foundation for distribution into the burgeoning low-cost smartphone market.”
The first part of the acquisition will be settled by Blue Label issuing R250m in shares and R650m in cash “on a deferred basis”. The second part of the deal, worth R1bn, will be settled in cash.
“The cash consideration of R1.65bn will be funded either from available cash resources, a further placement of shares, banking facilities or a hybrid thereof,” Blue Label said. — © 2017 NewsCentral Media