Tuesday, 12 February 2019

How MTN Plan to Raise $600m from Selling its Jumia Shares through IPO

At the forefront of telecommunication innovation in Africa is south African company, MTN. A telco that is never afraid to test the waters by investing in new ideas. Investing African e-commerce startup Jumia back in 2012 despite the economic challenges is a prime example. And now the Y'ello company is set to reap greatly from its believe in the business.

Jumia, a private company valued at more than $1 billion – is widely referred to as Africa’s version of e-commerce giant Amazon with footprint in Nigeria and 13 other countries including Egypt, Morocco, Ivory Coast, Kenya and South Africa.

Jumia is planning an initial public offering in New York this year that could value the business at about $1.5 billion, according to people familiar with the matter.

With MTN's 40% stake in the business, an IPO in the United States that could value Jumia at $1.5bn would make it a very good investment for MTN.

Interestingly, the IPO comes concurrently to pressures that MTN is facing in Nigeria with regard to paying regulatory fines.

Jumia’s largest shareholder MTN Group Ltd. is planning to raise as much as $600 million from selling its shares through the IPO, said one of the people, who asked not to be identified as the information isn’t public.

A new report by CB Insights, Jumia Group, Cell C and Promasidor are listed as part of 315 private companies around the world valued over $1 billion (as at 11 February 2019). The report states that all 315 unicorns have a total cumulative valuation of about $1058 billion.

The eCommerce giant secured € 300 million from various investors in 2016 to join the Unicorn league. It is currently operational in 14 countries.

Investors include AXA, CDC Group, Goldman Sachs, Rocket Internet, MTN Group and Orange.


INTERNET ACCESS

Jumia will tell potential investors that two-thirds of Africa’s 1.2 billion people still don’t have access to the internet, providing plenty of potential for sales growth and profitability, said one of the people.

Internet giants such as Alphabet Inc.’s Google and Facebook Inc. are among those striving to extend connectivity to the more remote and poorer parts of the continent.

MTN could be selling Jumia in New York at about the same time as an IPO of its Nigeria unit in Lagos, a move the carrier agreed to as part of a $1 billion regulatory fine in 2016.

The latter will be done in two stages, with an introductory listing in the first half of this year followed by a sell down of its majority stake, Chief Executive Rob Shuter said on a recent call with investors.

A successful listing of both Jumia and the Nigeria unit could help MTN reduce debt, which increased to 69.8 billion rand in June from 57.1 billion rand at the end of 2017. The rising liabilities and a dispute over non-payment of back taxes in Nigeria is weighing on the company’s share price, which has fallen by almost a third in the last 12 months.

The stock traded 0.8 percent lower at 85 rand by the close in Johannesburg on Friday, valuing the company at 160 billion rand ($11.8 billion).

Other Jumia shareholders include Goldman Sachs Group Inc., Millicom International Cellular SA, Orange SA and Africa Internet Group, a venture-backed by Goldman, MTN and Rocket Internet SE.

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