CDC offer for majority stake in Copperbelt Energy Corporation lapses

  • Zambian Transmission LLP has formally advised the Board of Directors of CEC PLC that the conditions to the offer had not been met in full. 
  • The closing date was extended twice on 20th April and 21st May this year, as approved by the SEC

An offer by Commonwealth Development Corporation – CDC and A.P. Moller for majority stake in Lusaka Securities Exchange – LuSE listed Copperbelt Energy Corporation – CEC officially lapsed at 5pm on 17 July 2018. This was confirmed in a stock exchange news (SENS) update on the Zambian bourse the LuSE. This followed a firm intention by Zambian Transmission LLP, a wholly owned subsidiary of CDC Group PLC to make a binding offer to purchase all the ordinary shares in the share capital of the energy distributor for a cash offer price of US$0.2338 per share translating to USD380million. The closing date was extended twice on 20th April and 21st May this year, as approved by the Securities and Exchange Commission following failure to satisfy one of the five conditions to the agreement. According to the offer document sighted by ZBT, the five conditions of the offer that needed to be either satisfied or waived include:

  1. Receipt of the merger control clearance from the Competition and Consumer Protection Commission-CCPC;
  2. 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 transmitter;
  3. Consent of ZESCO to the transaction as required pursuant to the Bulk Supply Agreement – BSA and execution by CEC PLC 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. (This was the condition that stalled completion of the transaction)
  4. Lenders to CEC PLC unconditionally consenting to the transaction and agreeing not to demand repayment of any debts owed by the energy distributor as a result of the transaction;
  5. 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.

All but the third were met and as such the transaction had to be extended twice to allow for negotiations relating to the bulk supply agreement.

Zambian Transmission LLP has formally advised the Board of Directors of CEC PLC that the conditions to the offer had not been met in full as at 5:00p.m. CAT on 17th July 2018, being the final closing date of the offer and that offer has accordingly lapsed with immediate effect.

CEC PLC is in discussions for the disposal of its telecoms assets that will see the power distributor sell off its 50% stake in CEC Liquid to Liquid Telecoms 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 for 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 would be conditional on regulatory approvals and any other third – party consents required.

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.

Copperbelt Energy Corporation – CEC PLC stock price trajectory extracted from bloomberg.

With markets pricing in news of a CDC takeover CEC shares had earlier in the year rallied 44% to ZMW2.15 a share from levels of ZMW1.42 a share. But as the transaction possibility seemed bleak, the  stock suffered a sell off that saw reversal of some gains to current levels. As at 5pm on 17 July, CEC PLC shares were trading for ZMW2.01 per share on the LuSE.

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