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