IHS settlement with Wendel could put more limits on MTN

Nigeria’s IHS Towers is taking steps to improve relations with its biggest shareholders, announcing a settlement on Tuesday with Wendel Group on governance issues at the cellphone tower company.

The agreement could further limit MTN’s control over the company. 

This is the latest in a series of events that caused IHS, co-founded in 2001 by CEO Sam Darwish, to be at odds with its investors. MTN and French investment group Wendel voiced concern about alleged governance issues at Africa’s largest cellphone tower business in 2023.

Wendel had gone so far as to file a case with the grand court of the Cayman Islands to force a vote at IHS on governance proposals after the board failed to put them forward at its June shareholders meeting. In August, MTN threatened similar court action against IHS. 

On Tuesday, IHS said it reached a settlement agreement with Wendel in relation to litigation and proposed changes to its articles of association (a document that forms part of a company’s constitution).

The tower company said this reflects its “commitment to strong corporate governance and constructive shareholder engagement, for the benefit of pre- and post-IPO financial and other shareholders”.

Wendel and MTN together own about 45% of the company.

As part of the settlement, certain changes to IHS’s articles of association will be proposed for shareholder approval at the company’s 2024 AGM. Among a host of proposed amendments, one appears to take direct aim at MTN. 

“Given IHS Towers’ ongoing commercial relationship with certain of its shareholders, appropriate considerations, including certain limitations on the ability of these shareholders to exercise those additional rights, have been included in the proposal,” the company said in a statement. 

MTN wants to have a greater say in IHS’s activities. It drafted a proposal to align its 26% equity stake and voting rights — capped at 20% — that IHS failed to put to a vote at its last AGM. The mobile operator’s voting rights have been capped since 2014 as per an agreement “to preserve IHS Towers’ independence and account for the fact that MTN is IHS Towers’ largest customer”.

Approached for comment on the latest developments, MTN said it “notes the proposals agreed between Wendel and IHS. Discussions regarding MTN governance concerns remain ongoing.”

Darwish said: “We believe the agreement announced today better aligns IHS Towers’ corporate governance with that of mature US-listed companies, which was an important goal we set at the time of our public listing. With the support of our pre-IPO shareholder base as well as newer investors post- listing, we continue to focus on executing our strategy of creating value for all our stakeholders.”

This comes as a court in Nigeria put on hold the implementation of a relocation of 2,500 towers from IHS to American Tower Company (ATC). In September 2023, MTN Nigeria said its leases on 2,500 sites, due to expire in 2024 and 2025, had been awarded to ATC Nigeria after a bidding process.

Darwish told Reuters in December that IHS would be willing to match ATC’s terms to win this business back, but MTN reportedly said the deal is final.

IHS owns 16,000 towers in Nigeria, of which MTN leases 14,600.

IHS, now valued at $1.42bn, has lost almost 75% of its value since listing on the New York Stock Exchange in October 2021. 

Wendel and MTN had argued that all shareholders with at least a 10% stake should have the power to nominate board members. To this, IHS has tabled a proposal “reducing the threshold for shareholders to nominate directors from 30% currently to 10%, on an individual shareholder basis following the AGM for fiscal year 2024, and on an aggregate basis following the fiscal year AGM for 2025”. 

According to people familiar with the matter, Darwish believes that if the MTN and Wendel resolutions are passed by shareholders, MTN could be well placed to take over control of the company in a hostile takeover.

gavazam@businesslive.co.za