Seychelles Pension Fund acquires 20% shares in Cable & Wireless Seychelles |22 November 2019

Mr Dugasse (4th from left) leading the press conference (Photo: Anel Robert)

‘A good investment and an opportunity,’says board chairman

The acquisition of 20 percent equity share ownership in telecommunication company Cable & Wireless Seychelles by the Seychelles Pension Fund (SPF) is “a good investment and an opportunity”.

This was said by the SPF board chairman Jacquelin Dugasse yesterday while giving more information to the press on the acquisition which he said is in line with SPF’s strategy to diversify its investment portfolio.

He was accompanied by SPF’s chief executive Lekha Nair and other SPF staff and board members.

On Wednesday this week SPF announced that it has acquired a 20 percent equity share ownership in the telecommunication company for a sum of US $24 million, amounting to around R340 million.

This follows the acquisition of Cable & Wireless Seychelles by a consortium of local entrepreneurs, namely, the Joe Albert Group, Jamshed Pardiwalla, Ravi Raghwani, Andy Bainbridge and professional services firm, ACM.

Mr Dugasse noted that the decision to accept the offer put forward to SPF by the consortium after the initial acquisition from Liberty Latin America (LLA), was taken by the board of trustees under his direction, in adherence to Article 5 (2) of the Seychelles Pension Fund Act (2005) which gives powers to the board to manage the affairs and operation of the fund, as well as investments.

He outlined the rigorous internal procedures before the decision was taken including investment appraisal and due diligence processes, as well as consideration of the financial statements, revenue, and capital expenditure of Cable & Wireless Seychelles (CWS) over the past decade, future forecasts for the business as well as risks associated with the telecommunications company.

“The investments and finance committee, who has an advisory role to the main board, conducts relevant assessments and analysis and makes its recommendations to the board of trustees. The committee met several times before they were satisfied that the acquisition is a good investment, and it submitted the recommendation to the board of trustees eight days ago,” said Mr Dugasse.

“The board feels as though it is a good investment and an opportunity. To date SPF has invested in banks in Seychelles Commercial Bank, insurance, Seychelles Breweries Limited and it has always been our wish to invest in telecommunications. We see that the company is promising despite competition, the dynamic market and we feel as though it is a good investment, which we will continue to monitor closely,” Mr Dugasse stated.

The deal was finalised on three conditions, the first of which is that SPF is afforded the same privileges as the original shareholders. Secondly, on account that CWS is a highly-leveraged company with 60 percent debt and 40 percent equity and the risks associated with highly-leveraged companies, it has been agreed that SPF’s US $24 million contribution be used to retire part of the debt owed by the consortium, which amounts to US $84 million. It must be noted that the total consideration price for the acquisition by the consortium was US $120.5 million (US $104 million plus US $16.5 million to the government in respect of stamp duties from 2016 when LLA purchase CWS from Batelco). The consortium injected US $46 million, translating into 57 percent ownership, as well as debt capital of US $70 million through Eastern and Southern African Trade Development Bank (TBD) and Absa Bank Limited.

The third condition is that if SPF wishes to exit, it will offer the shares back to the new owners at the highest value of the shares. SPF will have a seat on the board to ensure that its investment is protected.

The investment in CWS forms part of SPF’s medium term strategy to diversify its investment portfolio. Prior to the acquisition, SPF’s investments were limited to three categories, including 50 percent in real estate, fixed income assets and equities.

“We are diversifying our investment portfolio sooner than announced through the CWS investment. Before, we invested heavily in real estate due to lack of investment opportunities locally. We went from residential real estate to commercial real estate and we will not stop as there is a demand to buy property especially from local professionals so we will continue to build and sell,” Mrs Nair stated, mentioning that SPF will be offering Corail D’Or at North East Point for sale next.

SPF aims to increase investments in equities to rebalance their portfolio and generate more revenue and profits since the return on investment on equities is 13 percent annually as compared to 6 percent generated from real estate.

“SPF owns shares in banks, in Seychelles Breweries Limited and I want to note that we acquired shares from Seychelles Breweries for R59 million in 2005 and after seven years, we had already recovered our R59 million. From 2013 we have been receiving clean dividends, around R26 million collected through dividends as investment return,” Mrs Nair further asserted.

Forty-three thousand (43,000) persons actively contribute towards SPF contributions, all of whom will benefit from the acquisition, according to Mr Dugasse.

Laura Pillay