The South African government today announced that is has sold Transnet’s 18,71% stake in cellular network operator MTN, for a total consideration of R4,3-billion or R13,89 a share.
A statement released on Monday said that the transaction would benefit 2 200 MTN staff members. The Transnet stake was warehoused with Netherlands based passive investor ICE Finance in January.
Transnet said today that it has already accumulated the $475-million required for the unwinding of the ICE transaction. Transnet made a gain of one billion rand by selling the stake housed in ICE at a favourable exchange rate.
Transnet chief financial officer Sindi Mabaso told a media briefing in Pretoria that while the rand had been trading at R11,51 to the dollar when the
stake was warehoused in ICE, Transnet was expecting the currency to be trading at R9,15 to R9,20 to the greenback when the transaction is wound up.
She explained that there were still one or two conditions that should hopefully be finalised by Friday and ICE would hopefully be paid after that.
Said Public Enterprises Minister Jeff Radebe: “It makes good business sense for Transnet, government and MTN staff to consummate the transaction at the time when the rand is strong.”
The MTN consortium has formed a special purpose company, Newshelf 664, to facilitate the transaction.
MTN Group CE Phuthuma Nhleko told the briefing that Newshelf had raised the funds needed for the transaction through a consortium of South African banks, including Nedcor (NED) and FirstRand (FSR).
Of the R4,3-billion required, about R1,5-billion will be guaranteed by Transnet and funded from promissory notes to be raised as a bond. Nedcor had played a key role in underwriting the promissory notes, Nhleko said.
Radebe said that the deal confirmed government’s commitment to black economic empowerment through the restructuring of state-owned enterprises.
He said that Transnet made a profit of $12-million by closing out the hedge structure put in place at the time of the ICE finance deal.
Mabaso said that the rest of the saving was because Transnet was saving on finance costs, which were paid upfront, by winding up the ICE deal before its July 2003 expiry date. It had also earned interest on collateral left with ICE.
According to Radebe, the deal brought to an end the long search for a strategic equity partner (SEP). He noted that his department had issued a request for proposal on March 8 to 20 potential SEPs and none of these submitted bids.
MTN staff and management will replace Transnet in its voting pool agreement with MTN’s majority shareholder Johnnic Holdings (JNC).
“The transaction in many respects creates a milestone in terms of capital formation in the black community way,” said Nhleko. He said Newshelf should hopefully be ungeared in six to eight years. – I-Net Bridge