Global communications group MCI has sold 30% of UUNet SA to investment company J&J Group.
The price of the equity stake has not been disclosed, although J&J CEO Jayendra Naidoo says his company is paying a "substantial" sum.
Nasdaq-listed MCI wanted to grow its business in Africa and needed a partner that could enhance the business and also ensure black economic empowerment compliance, says Dan Crawford, MCI president of international and wholesale.
The group looked at several companies before choosing J&J, he says. "Jayendra and I signed yesterday and we hope to close the deal in December," he adds.
The stake also encompasses UUNet SA subsidiaries in other African countries, including Kenya, Namibia and Zambia.
There are a number of ICT companies in the J&J stable that are potential partners with and suppliers to UUNet, says Naidoo. "There is a lot of potential synergy there, especially in terms of the customer base. We have a good understanding of the requirements of corporate customers."
One of J&J`s investments, JSE-listed Faritec Holdings, has already been partnering with UUNet in the security arena.
MCI is itself in the process of being taken over by Verizon in an $8.4 billion deal expected to close within the next two months. Crawford says in terms of an agreement, Verizon has to approve any equity change ahead of the merger.
"So they approve of this arrangement," he adds.
MCI said recently it expected revenue in the range of $18 billion to $19 billion this year. International and wholesale, into which Internet provision falls, accounts for about $6 billion of total revenue, Crawford says.
Although MCI will not disclose the value of the J&J deal, Crawford says he and Naidoo arrived at a mutually satisfactory valuation of the company and the price J&J is paying for the stake represents a fair market value.
The current agreement does not contain a clause on any automatic increases in shareholding, but Crawford says the company would be open to talks on that if the issue arises.
The deal will strengthen the company`s market presence, transformation commitment and ability to tender for public and private sector business, says UUNet country manager Angela Gagahan. However, she adds that the deal is not about "ticking a box" but about leveraging partnerships.
"It was the right solution for our company," says Crawford. "We are very satisfied with this arrangement."
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