Econet Wireless Zimbabwe says the move to acquire a 10 percent stake in regional fibre operator Liquid Telecoms Holdings will offer the group “capital growth” opportunities.
The Mauritius-based Liquid Telecom Holdings Group has operating companies across the continent, namely in Botswana, the Democratic Republic of Congo, Kenya, Lesotho, Rwanda, South Africa, Uganda and Zambia, Zimbabwe and the United Kingdom.
“The proposed disposal presents a unique opportunity for Econet Wireless Zimbabwe to acquire a strategic interest in Africa’s largest open access cross fibre operator, Liquid Telecoms Holdings.
“The potential listing of the Liquid Telecoms Holdings through an Initial Public Offering (IPO) on a reputable international exchange would raise further capital for its business expansion and would also provide Econet Wireless Zimbabwe with an international asset that has prospects for capital growth,” said the group in a circular to shareholders.
Liquid Telecom has built Africa’s largest independent fibre network which runs from the north of Uganda to Cape Town, covering Africa’s fastest-growing economies, where no fixed network has ever existed before.
The network currently spans over 50 000 kilometres across borders and includes The East Africa Fibre Ring, and the first regional fibre ring on the continent.
Econet Wireless Zimbabwe is looking to angle its way into the regional fibre giant through the disposal of its 51 percent stake in Data Control and Systems (1996) Limited (which trades as Liquid Telecommunications Zimbabwe) in exchange for shares in Liquid Telecommunications Holdings worth $135 million.
The disposal of the 51 percent in Liquid Telecommunications Zimbabwe does not require shareholder approval and is termed an insignificant transaction given that its value is less than 5 percent of Econet’s market capitalisation. However, Econet Wireless Zimbabwe is seeking shareholder approval for the conversion of debentures into ordinary on the basis of 93,3 ordinary shares for every 100 debentures held as well as the demerger from Econet Wireless Zimbabwe of the company’s technology business under a new holding company, Cassava SmarTech.
Cassava SmarTech is set to be listed on the Zimbabwe Stock Exchange.
To this extent, an extraordinary general meeting (EGM) has been scheduled for 29th of this month.
According to the circular to shareholders, the rationale of the de-merger of Cassava SmarTech is to improve management focus and allow focused implementation of strategies as well as improve capital allocation decisions.
The de-merger will be achieved through a scheme of reconstruction, where 750 million ordinary shares will be issued on credit to be repaid from future dividends.
Econet Wireless Zimbabwe will then transfer its shareholding in EcoCash (100 percent), Econet Life (100 percent), Steward Bank (100 percent) and Econet Insurance (90 percent) into Cassava SmarTech for no cash consideration before a bonus issue of 2 679 300 700 shares to its members pro rata to their shareholdings.
And following the allotment of bonus shares, the company will issue a cash dividend to clear the members’ liabilities to the company on the initial issue of shares. After all the transactions are complete Econet Wireless Zimbabwe will have a net asset value of US20,71 cents per share.