Investment group Remgro increases stake in CIVH in new US$251.7m rights offer

SOUTH AFRICA – Investment group Remgro is set to increase its shareholding in Community Investment Ventures Holdings (CIVH) after participating in the company’s rights offer to raise R3.7 billion (US$251.7 million).

CIVH is raising fresh capital from its shareholders, which will be used to build up operations and offset debt.

Remgro currently holds 55.2% in CIVH and will now increase it to 55.5% after the rights offer.

CIVH, which is now valued at R23 billion (US$1.56 billion), issued a notice in May 2021 inviting all its shareholders to participate in a rights offer it was undertaking to raise an aggregate amount of R3.7 billion (US$251.7 million), saying the rights offer was made at 20% of the valuation price.

Remgro announced that through its wholly-owned subsidiary Industrial Electronic Investments (IEI), its proportionate share of the second rights offer shares will be issued for an aggregate subscription price of R2 billion (US$136 million).

“Remgro has resolved to take up all its rights in terms of the second tranche rights offer (STRO), namely, to subscribe for its proportionate share of the STRO shares and over-subscribe for 10,104 further STRO shares up to a maximum amount of R319 million (US$21.7 million) through IEI.

“Remgro will effect payment of the aggregate subscription amount due on 19 July 2021,” the company announced to shareholders.

CIVH, which is led by CEO Raymond Ndlovu, is active in the telecommunications and information technology sectors.

The group’s major operating companies are Dark Fibre Africa (DFA) and Vumatel, which constructs and owns fibre-optic networks.

DFA has deployed over 16,000km of ducting infrastructure in major South African metros, secondary cities and smaller towns. The company says its network runs with an uptime of 99.98%.

Vumatel pioneered fibre-to-the-home in South Africa and has since connected thousands of homes across Johannesburg, Cape Town and Durban to fibre internet.

The company, which has a footprint in excess of 600,000 homes, anticipates there are at least a further 700,000 homes in emerging markets.

“This equity capital injection will strengthen CIVH’s capital structure and allow it to retain flexibility to capitalise on future opportunities”

“CIVH will utilise the funds to repay all its debt at the holding company level, which was previously incurred in support of the acquisition of Vumatel,” Remgro explained in a statement.

“This equity capital injection will strengthen CIVH’s capital structure and allow it to retain the flexibility to capitalise on future opportunities. Remgro sees significant opportunities ahead for further growth in both of CIVH’s largest operating subsidiaries.”

“Remgro remains committed to developing South Africa’s IT infrastructure, seeing both attractive returns as well as the positive impact of job creation and broader access to the economy being created,” it added.

“Despite the difficulties of Covid-19, CIVH’s revenue grew by more than 25% (over the past year), while the group remained highly cash generative and invested in excess of R3.5-billion (US$238 million) during the prior fiscal year into expanding its operations and network.”

Funding

“Following the rights issue, CIVH is well funded and positioned for its next phase of growth,” Remgro executive Pieter Uys said in the statement.

“This further allocation of capital reaffirms our support for the CIVH team, market position and broader investment into developing South African broadband telecommunications infrastructure, enabling jobs and access to the economy.”

Explaining the two tranches of the rights offer, Remgro said: “CIVH has evolved since its inception from a small dark fibre operator in 2009 with only Vodacom as a customer, into a large telecoms company delivering a vast variety of products to a more differentiated customer base.”

It added that during 2021, various funding instruments used to fund CIVH’s operations and expansion will reach maturity and will be required to be refinanced or for which CIVH will require capital injections.

The board of directors of CIVH and its shareholders considered equity capital injections to be more appropriate for its capital structure and to retain the flexibility to capitalise on any available or future expansion opportunities.

“The proceeds from the first tranche of the rights offer were used to reduce CIVH’s debt and unlock debt facilities available to CIVH for further capital expenditure. The proceeds from the second tranche will be used to settle further debt owed by CIVH to Rand Merchant Bank and in respect of which Remgro has issued a guarantee.”

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