Blue Label Unlimited (BLU), the parent company of Cell C, has announced its intention to list Cell C on the Johannesburg Stock Exchange (JSE). This decision aligns with earlier communications to shareholders and potential investors regarding a future listing.
In preparation for the listing, BLU undertook a major restructuring that cleared all of Cell C’s debts and converted them into equity. As a result, The Prepaid Company (TPC), a subsidiary of BLU, will possess a substantial majority of shares post-listing. Some shares will also be allocated to Cell C’s executive team, allowing them to collectively own 4.5% of the company.
Alongside the listing, TPC plans to initiate a share sale to raise approximately US$442 million, with an option to sell an additional US$28 million in shares. This offer will include shares valued at around R2.4 billion dedicated to a Broad-Based Black Economic Empowerment (BEE) vehicle known as the BEE SPV.
TPC’s strategy is to leverage the funds raised from the share sale to improve its financial standing, including settling certain borrowings and ensuring dividends for shareholders. Additionally, surplus funds will be allocated to support working capital, but Cell C will not benefit directly from these proceeds.
BLU emphasises its commitment to advancing South Africa’s transformation agenda through effective B-BBEE initiatives. They are also working to meet the regulatory requirement to maintain a 30% ownership by historically disadvantaged individuals. The BEE SPV will play a crucial role in satisfying this ownership structure ahead of the listing.
The share offer will include an overallotment option, which is standard practice for such transactions and will not exceed 7% of the total offer size. BLU stated that the listing is contingent upon customary conditions related to capital market transactions, including the JSE’s requirements for free float and shareholder distribution.
Jorge Mendes, CEO of Cell C, highlighted that this listing marks a pivotal moment in the company’s growth trajectory. Although Cell C has been part of a listed entity, a separate listing is anticipated to significantly enhance the company’s growth strategy and competitive edge.
He expressed optimism that the listing would streamline Cell C’s balance sheet, improve access to capital for sustained growth, and increase public transparency and market discipline.
Plans for a Cell C listing have been in the works since 2016, when then-CEO Jose dos Santos indicated ambitions for a JSE listing in three to four years. However, initial recapitalisation efforts did not stabilise the company sufficiently, leading BLU to orchestrate a second recapitalisation.
In August, Cell C announced its first-ever profitable year, with growth in key revenue areas and improved operating margins compared to the previous year. Consequently, Blue Label has resumed recognising its share of Cell C’s profits and losses after previously impairing its investment.
Despite these advancements, Cell C continues to face challenges, remaining technically insolvent following a significant loss reported in the 2019 financial year.
