Blue Label Telecoms Offers $263 Million for 35% Cell C Stake

  • Bid values phone company at about $1.3 billion including debt
  • Controlling shareholder Oger to be diluted to 35 percent

Blue Label Telecoms Ltd. made an offer to buy a 35 percent stake in Cell C Pty Ltd. for 4 billion rand ($263 million) to expand the network of South Africa’s third biggest mobile-phone company and reduce the target company’s debt.

As part of the proposed deal, Cell C management will offer 2.5 billion rand for a 30 percent stake on behalf of employees, Johannesburg-based Cell C said in a statement on Thursday. 3C Telecommunications, a unit of Cell C majority owner Oger Telecom Ltd., would retain a 35 percent stake. Blue Telecom’s bid values Cell C at about 11.4 billion rand, excluding debt, or an enterprise value of 19.4 billion rand.

“It made a lot of sense to get involved in an asset that has really started to gain traction,” Mark Levy, co-chief executive officer of Blue Label, said in an interview. “The business model and the assumptions that they have created are sound.”

Blue Label shares fell as much as 7.4 percent, the most in a year, and traded 5.8 percent lower at 10.17 rand at the close in Johannesburg. That values the company at 6.9 billion rand.

Cell C trails Vodacom Group Ltd. and MTN Group Ltd. in terms of customer numbers in Africa’s most industrialized economy and faces further pressure as the former strengthens its position with the acquisition of Internet provider Neotel Pty Ltd. Cell C abandoned talks with Telkom SA SOC Ltd. last month after the landline operator and Dubai-based Oger couldn’t agree to a price.

The deal will reduce Cell C’s net debt to a maximum of 8 billion rand, with the goal of further reduction over the next 12 months.

“We’ve been working very, very closely on finding a way to recapitalize and restructure our debt,” Cell C CEO Jose Dos Santos said in an interview at his Johannesburg headquarters. “Any further capex that we need for at least the next three years will be self-funded and won’t require any further investment from the shareholders.”

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