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Unease as push for MTN listing grows

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November 25, 2011


*South African owners appear to footdrag on promise to list

There is growing disquiet among Nigerian shareholders in MTNNigeria, who now say the company led them to believe that it would list its shares on the Nigerian Stock Exchange (NSE) following the highly successful private placement in 2007.

In that private placement, the terms which are contained in a 117-page memorandum, dated December 7, 2007, MTN sold a total of 43,024,602 “MTN Nigeria linked units” or shares at $24.56 per unit, and it was intended to raise the Nigerian ownership of MTN Nigeria to 21.4 per cent, in the event that all the linked units offered were allocated to and bought by Nigerians. The transaction involved the sale of a total of 10.7 per cent of MTN Nigeria equity, part of which was offere 0 0d by some of the original Nigerian investors in MTN Nigeria, who off-loaded about 4.2 per cent of the total on offer and the balance coming from the South African majority equity holders.

On page 14 of this memorandum, MTN Nigeria committed to an exit 222.95mechanism in which it “acknowledged that the potential investors would require a level of liquidity in their investment. Liquidity will be provided by means of two methods”, MTN Nigeria said.

According to the document, “In the second phase, the exit mechanism will be implemented at the end of the three-year structured period. A special purpose vehicle being an SPV, will be incorporated and the linked units held by beneficial shareholders will be transferred to the exit SPV, in exchange for ordinary shares in the exit SPV. Some of the offerors will also have the option of transferring their linked units to the exit SPV.

According to the terms in the memorandum, “following the implementation of the transfer of the linked units to the exit SPV, it is intended that the shares of the exit SPV would be listed on the NSE or another recognised stock exchange, at the election of MTN International based on the prevailing market conditions and circumstances.”

Trouble however started, in 2010 when the Nigerian shareholders sensed that the South African owners were foot-dragging on the option to list and create liquidity for the Nigerian equity holders.

Instead of proceeding with arrangements to list, MTN Nigeria engaged Merrill Lynch South Africa Limited, to carry out a valuation of the business (MTN Nigeria) and on the basis of the valuation communicated by Sanbic IBTC on November 18, 2010, the Nigerians received what seemed to have been an offer of a buy back, at the rate of $35.4 per unit, converted at the ruling rate of N150.7 on November 12, 2010 to N5,332 per unit, about 40 per cent more (in USD terms) than they bought the shares in 2007.

On the back of this valuation and the implicit offer to buy, many of the Nigerian shareholders who took equity position in 2007, began arrangements to sell at least some of their stock but they got a shocker on the 7th January this year, when by a mail titled “exit offers by beneficial shareholders of MTN Nigeria communications Limited: notification of non-acceptance by offerors,” sent by Stanbic IBTC, the financial advisors to the private placement and now custodians and registrar.


The Nigerians were told “we wish to advise that the offerors, MTNI and the selling SPV shareholders have in terms of clauses 12.8 and 12.9 of the custodian terms and conditions declined to accept both the first and second exit offers in respect of the sale linked units offered by you.”

The devastated Nigerians were then told that they could take advantage of an over the counter, OTC window to address their mounting liquidity concerns.

Wale Goodluck, corporate services executive, MTN told BusinessDay: “Facts of the matter are, when the private placement was done, the listing of the SPV was one of the possibilities for exit.

“MTN International, under the terms, was given unfettered right to determine whether to elect to buy back the shares and or proceed with a listing of the SPV.

“The Nigerians went ahead to invest and are reaping excellent returns.

“It is true we had a valuation done and this was communicated to the equity holders. However MTN International elected not to buy back the shares because it believed that this will run counter to the spirit of the private placement which was to raise the Nigerian ownership.

“What caused the minor upset was that some of those who wanted to sell had begun to hatch their eggs when they saw the valuation and were hoping for a cash windfall.

“There is nothing we have done which is inconsistent with the letter and spirit of the private placement.”

How ever, a representative of several of the disaffected shareholders of MTN Nigeria, told Business Day in Lagos, “We were there on our own when MTN Nigeria commissioned this valuation and made us an offer.”

We did not ask for it. So it is a shame that they rejected an offer they themselves made to the Nigerian shareholders. An OTC as offered cannot be a transparent window and we frown at this.”

Business Day learnt that following the rejection, the Nigerians have requested that if MTN Nigeria will not list on the NSE, they should be given equivalent units of the MTN International shares listed on the Johannesburg Stock Exchange, so they can trade their equity, or if this is not acceptable to the South African majority holders, MTN Nigeria should be listed on an international exchange for the same purpose of providing the equity holders liquidity.

Business Day learnt that it was not until this year, that the Nigerian shareholders whose equity shares in 2007 were provided an ordinary summary of MTN Nigeria accounts by way of “facts behind the figures.”

MTN Nigeria is a huge business success, even by the admission of the owners, who in the memorandum prepared in 2007, said “MTN Nigeria has shown strong revenue growth since its launch in 2001 with revenue of N173.0 billion for the 6 months ended 30 June 2007. EBITDA has also grown significantly with EBITDA of N101.3 billion for the period ended 30 June 2007, achieving an EBITDA margin of 58.6 per cent.”

Source: Businessday


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