Cell C cautiously optimistic on recapitalisation prospects

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Cell C CEO Douglas Craigie Stevenson.
Cell C CEO Douglas Craigie Stevenson.

Cell C has welcomed the Competition Commission’s (CompCom’s) conditional approval of the proposed Gatsby SPV recapitalisation transaction.

The CompCom yesterday recommended conditional approval of the proposed acquisition of certain Cell C assets by special purpose vehicle Gatsby.

Reacting to the news, Cell C says despite this approval, the troubled telco remains cautiously optimistic until the deal has been fully concluded and all requirements have been met.

In a statement, Cell C CEO Douglas Craigie Stevenson says: “A recapitalisation is an important pillar of Cell C’s turnaround strategy. We are being diligent and thorough to ensure it is a transaction that meets all conditions and continue to engage with all stakeholders. In our minds it is not done and there is still work to do, but we are pleased with the progress to date.”

The recapitalisation news comes on the back of calls by analysts that the company needs significant fresh equity funding, or should participate in industry consolidation so that it can strengthen both its financial and market position.

With the conditional approval by the CompCom this week, some hope has now been restored on Cell C’s survival.

The latest proposed acquisition of “certain Cell C assets” came to light this week after the CompCom told Parliament it was prioritising the proposed transaction during the COVID-19 pandemic.

In a statement on Thursday, the CompCom said it has found that the proposed transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant markets.

“The commission further found that the proposed transaction does not raise any other public interest concerns.”

However, concerns stalling conclusion of the deal announced on Thursday include possible anti-competitive information exchange should the trustees who will control Gatsby SPV include individuals from firms that compete with Cell C.

The CompCom says these concerns were not considered in the assessment of the proposed transaction.

To mitigate this potential risk, the commission recommended the proposed transaction be approved subject to conditions that Gatsby SPV and/or the trust will not be owned/controlled by companies that compete with Cell C.

Furthermore, the CompCom is also opposed to companies that may compete with Cell C or firms that have a customer-supplier relationship with Cell C (other than a lending relationship) being appointed as trustees.

Gatsby SPV is a ring-fenced newly incorporated entity set up for the sole purpose of entering into the proposed transaction and will be controlled by a trust that is yet to be formed.

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