[dropcap]A[/dropcap]fter more than 18 months of negotiation, Blue Label is finally poised to buy a 45% stake in Cell C for R5.5bn, a deal that is set to transform both companies. Blue Label shareholders approved the deal at a general meeting in Sandton on Wednesday.
Prior to the meeting, Blue Label had already obtained irrevocable undertaking from 53% of shareholders to vote in favour of the deal, which will result in the restructuring of Cell C’s shareholding and its balance sheet, with interest-bearing debt reduced from about R23bn to less than R6bn.
The deal, which is being done through Blue Label subsidiary The Prepaid Company, is now expected to become effective on 1 August.
Blue Label last month said it had signed the “final equity transaction agreements” for the planned recapitalisation of Cell C. Under the plan, Cell C’s net borrowings will be reduced to a maximum of R6bn.
The Prepaid Company has agreed to provide “liquidity support”, to the extent required, in the form of interest bearing subordinated loans of up to US$60m, to a special purpose vehicle set up to hold shares in Cell C.
The recapitalisation is expected to put Cell C in a stronger position to compete with its bigger rivals, Vodacom and MTN.
The deal comes at the same time that Blue Label is acquiring handset distributor 3G Mobile — parent of Comm Equipment Company — for R1.9bn. This second deal forms part of a plan by the JSE-listed company to get customers that already buy its products, including prepaid airtime, to spend more with it.
“If we could just get the same customers to buy more from us, we’d double our business,” said co-CEO Brett Levy in a recent interview with TechCentral. Hardware, he said, is a “great add-on” to Blue Label Telecoms and the 3G Mobile acquisition would enhance the group’s earnings. — (c) 2017 NewsCentral Media