South Africa-based MTN Group has announced plans to sell 575 million shares of its most profitable subsidiary MTN Nigeria, which went public in Lagos in 2019.
“Today we announce our intention to proceed with a public offer for sale of up to 575 million shares in MTN Nigeria, by way of a bookbuild to institutional investors and fixed price to retail investors,” the company said in a notice filed with the Nigerian Stock Exchange.
“The offer is anticipated to open in November 2021 with a bookbuild to institutional investors, after which a fixed price is expected to be announced for retail investors also in November 2021. The offer is expected to close in December 2021.”
The transaction will see MTN Group rake in proceeds of about ₦101 billion ($245 million), based on MTN Nigeria’s (MTNN) current share price of ₦175.60. Hours after the announcement, the stock rose around 8% to ₦191.
A Bit of History
The planned sell-off is part of a broader intention, announced by MTN Group earlier, to sell down 14% of its current shareholding in the Nigerian unit. That will see its holdings in MTNN reduce from 76% to 62%.
While MTN Nigeria is the group’s largest and most profitable subsidiary, the telecom giant has had to deal with a number of billion-dollar disputes with the Nigerian government as well as faced significant macroeconomic challenges.
Last year, the Johannesburg-based group was unable to repatriate its $280 million dividend from its Nigerian subsidiary due to the challenges of securing foreign currency, amid the country’s forex liquidity crisis.
The share sale thus raises questions about the group’s intentions as it appears to be a gradual exit from the Nigerian market due to a lack of confidence.
Although the divestment helps the South African giant slightly reduce its exposure to headwinds in the Nigerian economy, the sell-down does not signal an exit from Nigeria, according to Ayobami Omole, a Lagos-based telecom analyst at Tellimer.
“Since its 2019 listing by introduction, the group has planned to sell part of its stake but held on due to market conditions,” Omole told TechCabal. “The sale is part of its asset realisation programme (ARP) meant to simplify its portfolio, focus on its pan-Africa strategy, and free up capital for improved allocation.”
Between January and September 2021, MTN Group saw its revenue grow to $8.2 billion, driven by success in some of its main markets, including Nigeria.
Despite the domestic challenges, MTN Nigeria has shown resilience. Within the same period, the local unit grew its profit after tax by 53% to ₦220 billion ($385 million).
“MTN Nigeria remains an important part of the Group and its fundamentals remain solid,” Omole said, adding that the share sale “gives local retail and institutional investors an opportunity to tap into MTN Nigeria’s growth.”
As part of its ARP, MTN Group is in the process of finalising a sale-and-leaseback of its South African telecom mast portfolio as well as list shares in the Uganda operation in Kampala.
The company recently raked in some proceeds from the initial public offering (IPO) of telecom infrastructure company, IHS Towers, in New York last month.