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Net 1 buys Blue Label stake in R5.5bn deal to boost Cell C

Net 1 agreed to subscribe for 118 million Blue Label shares.

Blue Label Telecoms will buy a 45% stake in Cell C for R5.5 billion ($400 million) to expand the network of South Africa’s third-largest mobile-phone operator and reduce the target company’s debt.

As part of the deal, Net 1 UEPS Technologies agreed to subscribe for 118 million Blue Label shares for R2 billion, giving the company a 15% stake in Blue Label, Net 1 said in a statement on Wednesday. The deal and recapitalisation of Johannesburg-based Cell C will be done on November 18, helping to reduce the company’s debt to R8 billion, it said.

“The recapitalisation provides the company with a sustainable growth platform,” Cell C chief executive officer Jose Dos Santos said in a separate statement. “This is a transformational transaction for Cell C.”

The deal will help support Cell C as the company tries to compete with competitors Vodacom Group and MTN Group, which dominate the South African mobile-phone market. The terms are different from the one Blue Label agreed to in December, when the company said it would buy a 35% of Cell C.

Blue Label shares rose 2.6% to R19.04 as of 9:20am in Johannesburg, on track to close at the highest since September 19.

Cell C management and staff will subscribe for 25% of the company and 3C Telecommunications, previously Cell C’s largest shareholder, will hold the remaining 30% of the total issued share capital. 3C is owned by Dubai-based Oger Telecom.

© 2016 Bloomberg

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