Lesaka will use its Cell C prepaid airtime inventory to finance its cash and equity acquisition deal with the fintech platform Adumo. Per a recent SEC filing, Lesaka owns $7.8 million (R144 million) of this airtime inventory.
Cell C’s repurchase of its prepaid airtime from investors has always been controversial. In 2017, the company agreed with lead shareholder Blue Label to repurchase R435 million of this airtime from the company per month. Years later, it is still unclear how Cell C’s investors got hold of this airtime in the first place and Cell C, Blue Label and Lesaka are yet to explain this too.
In the past, some of Cell C’s other investors have also made complaints about this arrangement of Cell C buying back the airtime from said investors.
As part of Cell C’s recapitalisation process, Lesaka and Cell C entered into an agreement under which Cell C agreed to repurchase, from October 2023, up to R10 million airtime inventory from Lesaka every month. Lesaka is a shareholder in Cell, currently owning a 5% stake which it values at $0 as a result of Cell C’s indebtedness.
According to Lincoln Mali, CEO of Lesaka, the capital from the Cell C airtime inventory represents “internal cash resources”. “The sale from the Cell C airtime inventory will form part of the proceeds that will go to this transaction,” said Mali in a media engagement.
When announcing the deal to acquire Adumo yesterday, Lesaka stated that the cash consideration for the deal would be R232 million ($12.5 million), meaning that the airtime inventory can finance just over 60% of the deal’s cash consideration.
The Adumo deal is expected to be completed in the third quarter of 2024. According to Lesaka, it will give the company access to a footprint of 1.7 million active consumers and 119, 000 merchants across South Africa, Namibia, Botswana, Zambia, and Kenya.