UK state-owned development finance institution, the Commonwealth Development Corporation (CDC) Group’s plans to acquire the Copperbelt Energy Corporation (CEC) for K3.709 billion has flopped.
This follows the failure by CDC to meet conditions to the Offer in full as at 17:00 Hours CAT on 17th July 2018, being the final Closing Date of the Offer.
According to a notice issued by the Lusaka Stock Exchange, CDC which made the offer under a new company called Zambian Transmission has formally advised the CEC Board of Directors that the conditions to the Offer had not been met in full.
CDC has advised that as the conditions to the Offer were not satisfied in full or the Offer declared unconditional as at 5:00p.m. CAT on 17th July 2018 the Offer has accordingly lapsed with immediate effect.
“Consequently, as the Offer has lapsed, it is no longer capable of further acceptance and any accepting CEC Shareholders cease to be bound by their acceptances,” it said.
On 30th January 2018, CDC and A P Moller Capital announced that they had made a bid to acquire CEC.
CEC is majority owned by Zambian Energy Corporation (“Ireland”) Limited (“ZECI”) which holds 52% shareholding whilst the balance of 48% is held by various institutional and retail investors.
Details of the circular to shareholders indicated that condition precedents needed to be meet for the deal to go through.
A condition precedent (CP) is an event or state of affairs that is required before something else will occur and in the CDC and CEC deal, several CPs were listed, according to cecinvestor.com.
1. the Minister of Finance of Zambia as holder of the Golden Share in CEC has consented to the change of control of CEC resulting from the Offer in accordance with the constitutional documents of CEC, on terms and in a form satisfactory to the Offeror;
2. the Energy Regulation Board of Zambia, in relation to CEC’s transmission license, electricity supply license and electricity generation license, has been notified of the Offer;
3. the COMESA Competition Commission has granted its approval of the Offer;
4. the Lenders (as described in the Circular) to CEC have consented to the acquisition of a controlling interest in CEC pursuant to clause 7.2 of the Common Terms Agreement between CEC and the Lenders; and
5. the Zambia Information and Communication Technology Authority (ZICTA) has consented to the change of control as required under CEC’s network license conditions and the Information and Communication Technologies Act No. 15 of 2009.
However, only 5 out of the 7 CPs have been agreed thus far. The following two conditions precedent to the Offer have not yet been fulfilled:
1. the consent of ZESCO Limited (“ZESCO”) pursuant to Clause 28(b)(ii)(c) of the Bulk Supply Agreement (the “BSA”) to any change of control (as defined in the BSA) of CEC resulting from the Offer and the waiver by ZESCO of its right to terminate the BSA as a result of such change of control, on terms and in a form satisfactory to the Offeror; and
2. the execution by CEC and ZESCO of an unconditional and irrevocable amendment to the BSA which provides for the extension of the term of the BSA for an additional period of 20 years on commercial terms which are no less advantageous to CEC than the existing terms of the BSA in a form and on terms satisfactory to the Offeror.
The last CP demanded that there be a renewal of the Bulk Supply Agreement (BSA) for an additional period of 20 years.
This was indicative of a desire to make the investment for the long term.