EOH gets R1bn equity booster
But shares are down to R40
TROUBLE-prone information and communications technology (ICT) group EOH Holdings fell 3.03 percent on the JSE yesterday to R40, despite the company announcing a R1 billion equity injection from Lebashe Investment Group as part of its amended Black Economic Empowerment (BEE) transaction.
EOH said both parties had signed final agreements which would see it becoming one of the largest transformed technology companies on the continent, with an effective black shareholding in excess of 50 percent.
It said the transaction would strengthen its competitive positioning in the market. The finalisation of the deal is subject to regulatory and shareholder approval.
This month, EOH appointed former MTN vice-president for digital services, data analytics and business development Stephen van Coller as its new chief executive.
The group said at the time that it was pursuing a new strategy, which is centred on reconfiguring it into two distinct and independent businesses, each with its own chief executive, unique brand and identity, business model, growth and go-to-market strategies. The two businesses are EOH branded services with Rob Godlonton as the chief executive and Nextec with Zunaid Mayet as the new chief executive.
Zunaid Mayet, incumbent chief executive of EOH, yesterday described the Lebashe transaction as an important milestone for the transformation of the technology sector.
“The amended deal structure will significantly enhance EOH’s BEE credentials, while providing growth capital that will benefit the group in the long-term,” Mayet said.
Lebashe is an established 100 percent black-owned investment holding company with interests in the South African financial and technology sectors.
The transaction would nullify the previously proposed R3bn debt facility offered by Lebashe to EOH. Lebashe chairperson Tshepo Mahloele said the group remained committed to the EOH strategy of leveraging and scaling independent reputable business brands. These will each forge a new path toward building a technological infrastructure ecosystem that will be invaluable in propelling Africa into the Fourth Industrial Revolution and putting Africa on the global stage.
“As Lebashe we agreed with EOH that their growth aspirations would be best served by a significant equity injection, as opposed to the previously proposed R3bn debt funding facility. We are in a unique position to be able to fund this transaction from our own balance sheet and thus achieve a landmark BEE transaction within the ICT industry, aligning ourselves directly to the shareholders and we hope shareholders will see this transaction as more favourable to both parties,” Mahloele said.
EOH also refuted reports that it had been blacklisted from doing business with the government, citing that the claims were aimed at tarnishing its image.
The company was reportedly blacklisted from doing business with the government after the National Homebuilders Registration Council and the National Treasury placed it on the database of restricted suppliers for a breach of contract in June.
EOH said the matter was a contractual dispute which the parties are currently resolving. “EOH is not blacklisted or restricted in any form,” the group said.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the revised terms of the investment by Lebashe into EOH was a sign of their confidence in the company. He said the investment would increase Lebashe’s direct influence in EOH significantly.
“The initial proposal was only R250 million direct equity investment and an additional lighter exposure to EOH through a R3bn debt facility. It looks they have done away with the debt facility and decided to increase their direct equity ownership to R1bn.
“The recent announcement of a new chief executive as well as the conclusion of the ENSafrica review of EOH’s business are likely to have given Lebashe more confidence to increase their direct equity ownership. However the revised terms of the transaction are more dilutive to existing shareholders,” Takaendesa said.