Blue Label is on a selling spree
The company sells its stake in Blue Label Mobile and 3G Mobile.
South Africa-based technology company, Blue Label Telecoms, said on Wednesday that DNI 4PL would be buying its interests in Blue Label Mobile as well as taking over 3G Mobile from its subsidiary The Prepaid Company.
The sales are subject to various suspensive conditions, and intended to “ensure a more liquid balance sheet”, according to Blue Label.
“Over the past two years, significant investments were made, necessitating an increase in interest-bearing debt in order to ensure that the group’s working capital requirements continued to be met. Accordingly, the Blue Label board of directors have made a decision to deleverage the business in order to ensure a more robust and liquid balance sheet going forward,” the company said in a statement.
“The funds obtained from the proposed transactions will be applied to reduce Blue Label's current interest-bearing debt.”
The disposals “will not have a negative impact on the extensive distribution network that Blue Label has established,” it added.
Blue Label will sell 809 ordinary shares of Blue Label Mobile, comprising 85 percent of the issued ordinary shares. The initial consideration payable is R350 million, while an additional R100 million will escalate at prime plus 2 percent, compounding annually in arrears from the fifth business day after the date on which all suspensive conditions are met and the Cell C board of directors pass the solvency and liquidity test as per the Companies Act, Blue Label said.
Blue Label is Cell C’s largest shareholder.
About 100 percent of shares in 3G Mobile, which distributes mobile devices and handsets to retailers and cellular network providers, will be sold to DNI for R544 million. The initial amount will be adjusted depending on whether surplus or inadequate provision was made for bad debts or obsolete trading stock in the 2019 balance sheet.
Conditions for both transactions include approval by the relevant banks and regulatory bodies, and in the case of Blue Label Mobile, approval by minority shareholders.
DNI is a provider of pre-paid airtime services and mobile subscriber starter packs. Net1, the former social grants distributor which now focuses on low-cost banking, lending and insurance transaction technology, previously held a majority stake in DNI, which it reduced earlier this year.
Net1 distributes mobile subscriber starter packs for Cell C via DNI.
The announcement from Blue Label comes the evening before it is set to report its latest annual financial results. These results were set to be revealed earlier in the year, but were delayed due to problems at Cell C.
On 19 August, Blue Label Telecoms warned shareholders that it expects headline earnings for the year ended May 2019 to be down by at least 20 percent from the prior year.
It added that its audit for the year ended May 2019 was ‘substantially complete’, but that it was in the process of determining the valuation of its investment in Cell C. Blue Label owns a 45 percent stake in Cell C, which it bought for R5.5 billion.