Letshego Africa has agreed to sell five of its East and West African subsidiaries for $62.7 million (about P860 million), as the pan-African lender moves to streamline operations, reduce debt and refocus capital on its core markets.
The Botswana Stock Exchange-listed group said the transaction involves the sale of its operations in Ghana, Tanzania, Nigeria, Rwanda and Uganda to Axian Digital Venture Holding and Management Limited, the financial services arm of Madagascar-based Axian Group.
Letshego said the aggregate transaction value was negotiated at arm’s length and was based on factors including historic and forecast earnings, regulatory capital requirements, net asset value, sovereign risk and prevailing market conditions.
Financial disclosures released by the company show that the businesses being sold carried a combined asset value of P3.82 billion as at the latest practicable date, while the book value of the net assets stood at P819.9 million. The market value of the assets was estimated at P823.9 million.
Despite the sizeable asset base, the subsidiaries have been loss-making. Letshego reported that the units recorded a combined net loss of P519.5 million in the latest financial year, compared to a loss of P154.8 million in the previous year.
The disposal itself is expected to result in a loss on sale of P281.1 million, according to the company’s pro forma financial effects.
Still, Letshego said the transaction is expected to strengthen its balance sheet and improve capital allocation efficiency. The group plans to use the proceeds to reduce debt, optimise its balance sheet and reinvest into higher-return markets.
The company added that the restructuring would also allow management to concentrate resources on priority markets while lowering operational overheads at head office level.
Pro forma financials released alongside the announcement indicate that the disposal will have a limited impact on shareholder metrics. Letshego’s net asset value per share is projected to increase marginally from 218.96 thebe to 219.14 thebe, while headline earnings per share and diluted headline earnings per share are expected to remain unchanged at 11.3 thebe and 11.0 thebe respectively.
The transaction has been classified as a Category 1 transaction under Botswana Stock Exchange listing requirements, meaning shareholder approval will be required before the deal can proceed. The sale is also subject to regulatory approvals across the five jurisdictions and other customary closing conditions.
Letshego said a shareholder circular containing full details of the transaction will be distributed within 28 days.