The board of IHS Towers has accepted an offer of $8.50 a share in a transaction that would see MTN Group increasing its shareholding to 100%, the mobile operator announced today.
The potential transaction is subject to various approvals and the delisting of IHS from the New York Stock Exchange (NYSE).
Earlier this month, the South African-based telephony group announced that it was in advanced discussions to acquire the 75% shares in tower operator IHS it didn’t already own.
The deal comes after in 2022, IHS Towers completed the acquisition of over 5 700 MTN towers in SA, in a deal that saw the NYSE-listed tower company fork out R6.4 billion.
After the 2022, deal IHS Towers owned 70% of MTN SA’s towers business, with the remaining 30% owned by a B-BBEE consortium. Under the deal, IHS Towers also provided power management services to MTN SA on approximately 13 000 sites, including the acquisition portfolio.
Since then, MTN and IHS had been at bickering over alleged governance issues at the tower company, with MTN accusing its affiliate of breaching shareholder agreements.
In its statement today, MTN says upon the completion of IHS’ announced disposals (on 11 February and 17 February) of its Latin American assets, it is intended that MTN will acquire 100% of IHS’s remaining business.
IHS issued a statement last week saying it agreed to sell its 51% stake in I-Systems, a specialist provider of shared optical fibre networks in Brazil, to TIM, the owner of the remaining 49% of I-Systems.
The deal marked IHS Towers’ exit from the Brazilian fibre sector as the company focuses growth in lower capex, higher return businesses.
The I-Systems transaction reflects an enterprise value of $452.6 million, with the network covering 9.3 million homes (6.4 million of which are fibre).
Unlocking value
IHS is one of the world’s largest tower companies, with nearly 29 000 towers in Africa serving various mobile network operators in five key MTN markets.
According to the mobile operator, the proposed transaction, which follows discussions noted on 5 February, marks an important step to unlock compelling value for MTN and strengthen and reintegrate its ownership of critical digital infrastructure across Africa.
For IHS shareholders, it notes, it provides them with an attractive opportunity to crystallise value.
The funding for the proposed transaction of the remaining shares MTN does not already own, for a consideration of some $2.2 billion (R35 billion), will be through cash of approximately $1.1 billion on IHS’s balance sheet, along with available liquidity and debt from MTN.
MTN has approximately 24.7% shareholding in IHS, and as part of the transaction, it intends to take the company private through the acquisition of all outstanding shares it does not own, pursuant to a cash merger.
By reintegrating the tower assets, MTN says it will be able to internalise the margin currently paid to IHS, benefit from current and future incremental third-party revenues, improve cost predictability and unlock significant long-term value embedded in its existing investment.
“This proposed transaction is a pivotal step in further strengthening MTN Group’s strategic and financial position for a future where digital infrastructure will become ever more essential to Africa’s growth and development,” says MTN Group president and CEO Ralph Mupita. “This transaction gives us a unique opportunity to buy back our towers and strengthen our ability to be partners for progress to the nation states in which we operate.
“For IHS customers and partners across the continent, we commit to continuing high standards of service and the right governance of what is the largest standalone and integrated tower company in Africa, enabled by the excellent people within IHS.”
Through this transaction, shareholders of IHS will receive $8.50 per share, says MTN, adding that this translates to an 9.7% premium to the 30-day volume-weighted average price as at 4 February (the last day of trading before the release of MTN’s cautionary announcement) on the NYSE, enabling them to unlock the value of their investment.
Letter of support
Long-term IHS shareholder Wendel has provided a letter of support to vote in favour of the transaction and will receive full liquidity on its shares upon closing. With support from Wendel (and certain affiliates) and MTN being able to vote at a general meeting, 40% has already been secured of a minimum two-thirds approval of voting shareholders, the mobile operator says.
IHS chairman and CEO Sam Dawish comments: “The proposed transaction deepens our long-standing partnership with MTN as it combines Africa’s largest mobile network operator with one of its largest digital infrastructure platforms and underscores the strong connection between IHS Towers and the African continent.”
The proposed transaction is subject to IHS shareholder approval, regulatory approvals in the relevant markets and customary closing conditions.
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