CDC-APMC CEC USD380mn bid stalls as Power trans­mit­ter di­vests tele­coms as­sets

Zambian Business Times - - FRONT PAGE -

A bid by Com­mon­wealth De­vel­op­ment Cor­po­ra­tion – CDC owned and con­trolled Zam­bian Trans­mis­sions LLP to­gether with A.P. Moller Cap­i­tal to take over the Lusaka Se­cu­ri­ties and Ex­change – LuSE listed Cop­per­belt En­ergy Cor­po­ra­tion Zam­bia plc - CEC suf­fered a set­back af­ter an an­nounce­ment on 21st May 2018 by the en­ergy trans­mis­sion com­pany sec­re­tary, Ju­lia Chaila that the out­stand­ing con­di­tions to the of­fer, had not been sat­is­fied or waived. Chaila fur­ther an­nounced the ex­ten­sion of the of­fer pe­riod to next month 17th July 2018.

Com­mon­wealth De­vel­op­ment Cor­po­ra­tion – CDC is a London De­vel­op­ment Fi­nance in­sti­tu­tion while and A.P. Moller Cap­i­tal is a Copen­hagen based fund man­age­ment com­pany fo­cus­ing on at­trac­tive in­vest­ments that max­imise so­cial im­pact. CDC has a track record of key in­vest­ments in Zam­bia to in­clude Zam­beef, Mpongwe to men­tion but a few.

CDC had through its newly reg­is­tered lim­ited li­a­bil­ity part­ner­ship in­cor­po­rated un­der the laws of Eng­land as Zam­bia Trans­mis­sions LLP put out a cash of­fer price for each CEC Share at US$ 0.2338 in cash, that would be re­duced by US$ 0.016 to re­flect the 2018 div­i­dend (which CEC share­hold­ers will be en­ti­tled to re­tain). The of­fer price was based on an ex­change rate of ZMW9.6787 to a unit of US$1 ( be­ing the bid rate as at close of busi­ness on 29 Jan­uary 2018 pub­lished by Stan­bic Bank Zam­bia Lim­ited) and tak­ing into ac­count the 2018 Div­i­dend.

The Zam­bian Busi­ness Times - ZBT con­tacted CEC Ad­vi­sor for in­vestor re­la­tions Pre­cious Chisenga to es­tab­lish ex­actly which con­di­tion that the deal failed to meet, but the com­pany is tight lipped and re­ferred all queries to the of­fi­cially pub­lished state­ments. Ef­forts to get a com­ment from the com­pany sec­re­tary proved fu­tile as she was re­ported to be in meet­ings by pub­li­ca­tion.

Ac­cord­ing to the of­fer doc­u­ment seen by ZBT, the five (5) con­di­tions of the of­fer that need to be ei­ther sat­is­fied or waived in­clude: the re­ceipt of the merger con­trol clear­ance from the Com­pe­ti­tion and Con­sumer Pro­tec­tion Com­mis­sion- CCPC; con­sent of the holder of the golden share ( i.e. the Zam­bian gov­ern­ment through the Min­is­ter of Fi­nance) to the trans­ac­tion as re­quired by the ar­ti­cles of as­so­ci­a­tion of the en­ergy trans­mis­sit­ter; con­sent of ZESCO to the trans­ac­tion as re­quired pur­suant to the Bulk Sup­ply Agree­ment - BSA; ex­e­cu­tion by CEC and ZESCO of an amend­ment to the BSA which pro­vides for an ex­ten­sion of the term of the agree­ment for an ad­di­tional pe­riod of 20 years.

The other two con­di­tions were that the lenders to CEC un­con­di­tion­ally con­sent to the trans­ac­tion and agree­ing not to de­mand re­pay­ment of any debts owed by CEC to them as a re­sult of the trans­ac­tion; and that valid ac­cep­tances be­ing re­ceived in re­spect of shares which, to­gether with any CEC stock ac­quired by the of­feror and per­sons act­ing in con­cert with it (whether pur­suant to the of­fer or oth­er­wise), will re­sult in the of­feror and per­sons act­ing in con­cert with it hold­ing a ma­jor­ity of the vot­ing rights at­tach­ing to the CEC Shares.

A fur­ther re­view of the of­fer doc­u­ments for CEC, show that the Zam­bian Trans­mis­sions LLP will be co - owned and man­aged by both CDC and A.P. Moller Cap­i­tal. CDC has en­tered into a bind­ing eq­uity com­mit­ment let­ter with A.P. MC pur­suant to which the lat­ter has agreed, sub­ject to valid ac­cep­tances be­ing re­ceived by the of­feror ( Zam­bian Trans­mis­sions LLP) in re­spect of more than 50% of the CEC Shares and the of­fer oth­er­wise be­com­ing wholly un­con­di­tional, to pro­vide a fixed amount of cap­i­tal which will re­sult in it hav­ing a mi­nor­ity in­ter­est in the of­feror. Pur­suant to the mem­bers' agree­ment in re­la­tion to the of­feror, CDC will re­tain man­age­ment and vot­ing con­trol of the of­feror. A.P. MC will have rights in re­spect of a lim­ited num­ber of re­served mat­ters.

A.P. MC is an al­ter­na­tive in­vest­ment fund domi­ciled in Den­mark with the pur­pose of cre­at­ing and en­abling op­por­tu­ni­ties through in­vest­ments in African in­fra­struc­ture. A.P. MC was launched in Au­gust 2017 backed by a se­lec­tion of blue-chip Dan­ish in­sti­tu­tional in­vestors and has a to­tal fund com­mit­ment to date of US$650mil­lion.

And in a re­lated and fur­ther an­nounce­ment, CEC an­nounced that it has en­tered into dis­cus­sion for a sale agree­ment with Liq­uid Telecom­mu­ni­ca­tions Hold­ings Lim­ited for the sale of CEC’s 50% share­hold­ing in their joint ven­ture com­pany - CEC Liq­uid Telecom­mu­ni­ca­tion Lim­ited Zam­bia for a cash con­sid­er­a­tion. CEC Liq­uid Tele­com Zam­bia is a joint ven­ture be­tween Liq­uid Tele­com Group and Cop­per­belt En­ergy Cor­po­ra­tion PLC (CEC). Liq­uid Tele­com is the lead­ing in­de­pen­dent data, voice and IP provider in East­ern, Cen­tral and South­ern Africa’s sup­ply­ing fi­bre op­tic, satel­lite and in­ter­na­tional car­rier ser­vices to Africa’s largest mo­bile net­work op­er­a­tors, ISPs and busi­ness of all sizes. In a se­cu­ri­ties ex­change news note re­ceived on Wed­nes­day May 23, 2018, CEC com­pany Sec­re­tary Ju­lia Chaila stated that CEC is the le­gal and ben­e­fi­cial owner of 50% of the al­lot­ted and is­sued share cap­i­tal of CEC Liq­uid Tele­com. She fur­ther stated that the com­ple­tion of the trans­ac­tion shall be con­di­tional upon and sub­ject to re­ceipt of the rel­e­vant reg­u­la­tory ap­provals and any other third -party con­sent that are re­quired.

Ac­cord­ing to the 2017 an­nual re­port “the board stated that the strat­egy was re­viewed for the five-year pe­riod 2017 to 2021”. Man­age­ment pre­sented a seven-pil­lar strat­egy that seeks to mod­ernise and ef­fi­ciently man­age the CEC net­work; con­sol­i­date its re­gional mar­ket po­si­tion; re­alise mul­ti­ple power sources; en­hance stake­holder en­gage­ment;

sup­port the re­al­i­sa­tion of a ro­bust tar­iff set­ting and mi­gra­tion path; pro­vide man­age­ment ser­vices and in­vest in vi­able gen­er­a­tion and trans­mis­sion projects aligned to its core busi­ness.

The 2017 an­nual re­port shows that the sig­nif­i­cant share­hold­ers in CEC are cur­rently the Zam­bian Gov­ern­ment with 1 golden share, the Zam­bian En­ergy Cor­po­ra­tion (Ire­land) Ltd with 52%, ZCCM IH with 20%, Stan­dard Char­tered Bank Se­cu­ri­ties Ser­vices 6.78% and the bal­ance is held by pri­vate in­sti­tu­tions and in­di­vid­u­als some of which are on the LuSE.

– A.P. Moller.

Power trans­mis­sion lines to the mines on Zam­bia’s Cop­per­belt. The Cop­per­belt En­ergy Cor­po­ra­tion is the key sup­plier of bulk power to the mines. The en­ergy trans­mis­sion and dis­tri­bu­tion com­pany is in the mid­dle of a USD380mn takeover bid by CDC

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