Altech which owns 61 percent of KDN has offloaded its East African network interests to Liquid Telecommunications Holdings (Liquid), a highly successful telecommunications group operating in southern Africa enabling Altech to put to an end the losses being incurred in East Africa and will result in Altech acquiring a strategic minority interest in Liquid.
Liquid’s presence is strengthened with now the largest single fibre network in Africa, spanning Kenya, Uganda, Rwanda, Zambia, Zimbabwe, Botswana, DRC, Lesotho and South Africa.
According to Altech Group CEO, Craig Venter the East African operations have been problematic and unprofitable and the transaction with Liquid opens up a positive new chapter for the firm.
Venter said,“During the past two years we have sustained substantial losses and impairments on our East African assets. However, as a consequence of this transaction these losses will now discontinue and we can anticipate attractive returns on our investment in Liquid.”
Altech is also moving to dispose its loss-making Altech West Africa operations.
Liquid CEO Nic Rudnick says “Altech’s East African operations have built the largest fibre network in the region which has huge potential. I strongly believe that its people, its network and its customers will all add value and opportunity to our current operations. Liquid has been building and investing in a high-quality pan-African fibre network for many years and this deal will accelerate our progress by enlarging our network footprint and complementing our existing product portfolio. We are a strong and ambitious company and have a long-term investment plan for the region.”
Altech will contribute its majority interests in Altech East Africa on a net debt-free and cash-free basis, as well as subscribe and pay US$16.5m for new shares in Liquid, to give it an initial 8.6% equity stake in the company, with shareholder voting rights of 10%, and the potential to further increase the shareholding in Liquid in the future. Altech will also, for as long as it holds at least 5% of the issued share capital of Liquid, be entitled to one director on the board of Liquid.
In the event of a listing by the Liquid group on a stock exchange, provision is made for an exchange of Altech’s interest in Liquid, for shares in the listing entity, based on the greater of an independently-determined fair market value or, in the first year after the conclusion of the transaction with Altech, US$50 million.
The transaction also provides Altech with a put option, should it wish to put its shares in Liquid to its controlling shareholder, at an independent merchant bank valuation.
Altech will become a strategic minority shareholder in Liquid, holding an initial 8.6% of Liquid’s issued share capital, with shareholder voting rights amounting to 10% and representation on the board of the Liquid group.
Altech will contribute its interests in its East African network assets and will subscribe for the issue of new shares in Liquid for cash. Liquid’s controlling shareholders have indicated that Altech may be afforded the opportunity to increase its shareholding in Liquid, in the future, in order to enhance the strategic partnership between Liquid and Altech.
In 2007, Altech formed Altech Stream Rwanda Limited (“ASR”). In 2008, Altech acquired controlling shareholdings in the companies now known as Altech Kenya Data Networks Limited (“KDN”), Altech Swift Global Limited (“ASG”), and Altech Infocom Limited (“Infocom”). KDN had earlier established Africa Digital Networks Limited (“ADN”) in the Democratic Republic of Congo (“DRC”), currently a wholly-owned subsidiary of KDN.
Altech owns 60.8% of KDN; 51% ASG , 51 percent Infocom. ADN and ASR are now held 100% and 90%, respectively, by KDN, which has also acquired a 10% shareholding in the company owning the TEAMS undersea cable operation. Certain of the minority shareholdings in these companies which are currently held by local parties in the countries concerned, will also be acquired by Liquid simultaneously.
In 2009, Altech incorporated Altech Data International Limited (“ADI”), which is currently owned 60.8% byAltech. ADI acquired IRU’s on the SEACOM undersea cable for on-sale to KDN and other clients.
KDN, Swift, ASR, Infocom, ADI and ADN are collectively called “AEA”. Post transaction, Liquid will own the following percentages in the various companies – KDN (80%), ASG (100%), Infocom (80%), ASR (75%), ADI (100%), ADN (100%). Liquid intends transferring ASG to KDN post the transaction.
AEA owns and operates fibre networks, WiMax, Microwave, WiFi and satellite facilities throughout East Africa and in the DRC. AEA also provides ISP services to clients in the countries in which it operates. In 2011, KDN built a co-location data centre in Nairobi, which is the largest facility of its kind in East Africa.
Altech is entitled to 10% of all votes capable of being cast at general meetings of ordinary shareholders of Liquid; o for so long as Altech holds not less than 5% of the total issued share capital of Liquid, Altech will be allowed to appoint one director on the board of Liquid; o Altech shall not be entitled to receive any dividends during the period commencing on the effective date and ending eighteen months thereafter; Altech and Econet Wireless Global Limited (“EWG”), the majority shareholder of Liquid, will have mutual put/call rights in respect of the shares constituting Altech’s interest in Liquid and if either party exercises this right to acquire or dispose of the shares concerned this will be at an independently-determined fair market value, provided that if such right is exercised prior to the first anniversary of the effective date, the fair market value of the shares shall be the greater of US$50 million or the independently-determined fair market value; any Liquid holding company will be allowed to purchase Altech’s interest in Liquid in exchange for shares in the holding company concerned, in the event of that company listing on a stock exchange, at an independently-determined fair market value, provided that this will be the greater of that value or $50 million should the listing occur on or prior to the first anniversary of the effective date;