Telecommunications, media and entertainment group Johnnic Holdings Limited (JNC) on Monday announced details to unbundle 31,9% of its shareholding in telecommunications unit, MTN Group Limited (MTN).
Approximately 526 743 001 MTN Group shares will be unbundled in a ratio of 3,16539 MTN Group shares for each Johnnic share held, Johnnic said.
The R7-billion transaction will see Johnnic shareholders acquire a direct stake in telecommunications giant MTN Group, with the National Empowerment Consortium (NEC) structure also migrating to the MTN Group.
“This deal marks a significant milestone in our restructuring history, and will effectively result in the old group being split into two independent and separately listed units: telecommunications, through the MTN Group, and media and entertainment, through Johnnic Communications Limited (Johncom, JCM),” says Jacob Modise, Johnnic chief operating officer.
Over the past five years, Johnnic has transformed itself into a focused telecommunications, media and entertainment group. The focus of these sectors was based on a convergence model, where value would be created by the media and entertainment assets providing the content that would be packaged for distribution on various platforms, including a telecommunications one.
“In the initial roll out of our convergence strategy, control of the entities through the holding company was necessary. Now that this strategy has matured, central control is no longer a critical requirement,” says Modise.
The Johnnic control structure served as a vehicle through which the underlying companies obtained their empowerment credentials. Following the 18% acquisition of MTN Group by management and staff, through Newshelf 664 (Proprietary) Limited, the Johnnic board determined that there is no longer a need to maintain the control structure with regard to the telecommunications assets for the purposes of perpetuating empowerment.
“Management’s 18,7% shareholding combined with the NEC’s 9% shareholding in MTN following the unbundling, will place empowerment in MTN just under 30%.”
In contrast with the benefits that the holding company structure provided, the structure created a value trap in that Johnnic shares traded at a discount to the value of the underlying listed and unlisted assets.
“The unbundling will unlock a substantial portion of the discount which Johnnic shares traded to its underlying net asset value,” says Modise.
Johnnic has realised R395-million to fund its obligations in the Sun Coast Casino and Entertainment World, a joint-venture casino development in Durban, and to clear the debt within its exhibition operation, Gallagher Estate, as well as at the holding company.
In addition, the group will retain 40-million MTN Group shares to cover a corporate guarantee for the casino and further working capital for the company.
Subsequent to the unbundling, Johnnic’s holdings will entail its interest in Johncom, Gallagher and casino and remaining property interests. The resulting Johnnic/Johncom pyramid structure will need to be resolved in terms of the rules of the JSE Securities Exchange.
Johnnic’s listing will transfer from the “Telecommunications Services — Wireless Telecommunications Services” sector to the “Media — Photography — Publishing & Printing” sector of the Johannesburg Stock Exchange. – I-Net Bridge