Blue Label Telecoms has secured new buyers to acquire shares in the business for R2bn after Net1 UEPS Technologies decided to reverse an earlier decision to purchase a 15% interest for the same amount.
Without giving any reasons for its about-turn, Net1 said on Thursday it would no longer buy a stake in Blue Label but would still acquire a 15% stake in Cell C for R2bn.
Blue Label is also buying a 45% interest in Cell C for R5.5bn as part of the recapitalisation programme aimed at reducing the country’s third mobile network operator’s debt.
The deal with Cell C, which has 15-million subscribers, will allow Blue Label and Net1 to expand their technology products and services.
The new deal is likely to see some of Blue Label’s existing shareholders raising their holding in the firm. New investors may also be introduced.
Net1 said it would still proceed with its acquisition of a noncontrolling interest in DNI-4PL, which distributes Cell C’s SIM card starter packs and pre-paid airtime vouchers. Net1 has the option to acquire a controlling interest in DNI in the future.
Net1 will settle the purchase consideration for these two investments using a combination of surplus cash and debt.
Mergence Investment Managers’ portfolio manager Peter Takaendesa said the management changes at Net1 could have resulted in a new strategic focus for the company.
"It’s possible also that some shareholders on both sides of the transaction are not comfortable with the proposed association given recent developments," he said.
Net1 has come under fire over the social grant distribution tender and related business practices. This has led to the departure of founder and CEO Serge Belamant and also changes to the board.
Falcon Crest Asset Managers chief investment officer Farai Mapfinya viewed Net1’s participation in Cell C not only as "an integral technology partner but a solid capital partner and the scale back in investment should be somewhat of a concern to Cell C, but not greatly material in our view".
Net1 was initially going to spend R4bn buying holdings in Cell C and Blue Label.
Momentum SP Reid Securities analyst Sibonginkosi Nyanga said Net1 probably opted to ditch the Blue Label deal because DNI, which operated in the same market as Blue Label, would likely provide it with a "cheaper entry into the space".
Blue Label said it had obtained irrevocable undertakings from more than 50% of its shareholders to vote in favour of the Cell C deal and the latest deal with new unnamed investors.
The transaction is expected to be completed at the end of June.
However, Cell C’s black economic empowerment partners, CellSAf, are opposing the transactions and have filed court papers against all parties involved.
Blue Label’s share price closed 3.12% lower at R15.21 while Net1 ended the day unchanged at R123.50.