Vodafone to take controlling 65% stake in Vodacom

Vodafone has announced that it is to acquire an additional 15% stake in South Africa’s largest mobile operator, Vodacom, for 22.5 billion rand (US$2.28 billion), raising its stake in the operator from 50% to a controlling 65%.
Vodacom will become a subsidiary of Vodafone, and will be converted into a public company and listed on the Johannesburg Stock Exchange (JSE). The remaining 35% will be de-merged by Telkom to its own shareholders.

Under the transaction, Telkom’s shareholders will therefore receive both a dividend from the sale of 15% of its 50% stake in Vodacom and a direct shareholding in Vodacom from the remaining 35%. Telkom itself will retain 50% of the proceeds from the sale, which it will reinvest to “fully execute its core strategy”.

The transaction is expected to close and Vodacom Group shares be listed on the JSE during the first half of 2009 subject to a number of conditions, including the approval of 75% of Telkom shareholders, the South African competition authorities and the regulator, that the remaining 35% is de-merged to Telkom’s shareholders, and that Vodacom is listed on the JSE.

Telkom SA, South Africa’s fixed line incumbent, currently owns a 50% stake in Vodacom; Vodafone currently owns the other 50% after increasing its stake from 35% in 2006 for 16 billion rand (US$2.43 billion). Vodafone has been pursuing an additional shareholding in Vodacom for 18 months and during October 2008 said, after a new round of discussions had begun in May 2008, that it had made a non-binding proposal to acquire a further 15% stake in Vodacom for 22.5 billion rand.

The acquisition is subject to a number of conditions, including approval by 75% of Telkom’s shareholders; Vodacom Group listing on the JSE; and Telkom de-merging the remaining 35% of Vodacom Group to Telkom’s shareholders. According to a company press release, Telkom’s two largest shareholders—the South African government and the Public Investment Corporation Limited, owning a combined 58%—have irrevocably committed to vote in favour of the transaction and will become significant shareholders in Vodacom Group following the completion of the transaction. The government has agreed that it will retain a minimum shareholding of 10% in Vodacom Group for a period of 12 months after the listing on the JSE.

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