The move is expected to result in the current major stakeholder in Cell C, Dubai-based Oger Telecom, diluting its stake from 75% to approximately 27%, according to a report from technology news website TechCentral.
Johannesburg listed Blue Label distributes prepaid airtime, starter packs, data and electricity tokens. It also specialises in transactional offerings such as ticketing and financial services.
And Blue Label said in a market update on Thursday that it plans to “contribute R4bn to Cell C by way of a subscription for approximately 35% of Cell C’s total issued share capital following the conclusion of Cell C’s recapitalisation programme”.
The deal is expected to be effective on June 1 2016 and will reduce Cell C’s net borrowings to a maximum of R8bn, said the two companies in separate statements.
Meanwhile, Cell C further said that its management – on behalf of the company’s employees – has also submitted a binding offer to co-invest.
This means that if the restructuring deal is successful, then Cell C’s current shareholder and holding company 3C Telecommunications will hold 35% of the mobile network, management and staff 30% and Blue Label 35% of the ordinary shares in Cell C.
“Should this transaction be approved it will become one of the largest employee ownership deals in the country,” said Cell C’s chief executive officer Jose Dos Santos in a statement.
“Through this transaction, we will see more employees of our company share in the success as they continue to deliver,” said Dos Santos.
Blue Label said the transaction is still subject to agreements, the securing of funding by all parties, Cell C’s aggregate net borrowings being reduced to R8bn after the deal, and obtaining regulatory approvals.
Reasons for Blue Label investing in Cell C include the mobile network having increased its subscriber base from 9 million in 2012 to 22 million to date and Cell C’s investments in network infrastructure.
Blue Label said it has also been one of the primary distributors for Cell C’s products over the years.
“The proposed transaction provides a compelling value proposition to Blue Label, as well as to Cell C and its customers, through vertical integration affording both companies the opportunity to realise synergies in product distribution, and positioning Blue Label to benefit from the improved operational and financial performance that the combined platform would create,” said Blue Label in a statement.
The move by Blue Label also comes after Telkom last month announced that it had abandoned talks to buy Oger Telecom’s stake in Cell C.