Mobile phone operator Vodacom Group, its existing BEE partners and a newly formed staff scheme today announced a broad-based BEE transaction of up to R17.5 billion that will see the BEE partners exchange their current shareholding in Vodacom South Africa (Vodacom SA) for a shareholding of between 5.8% and 6.25% in Vodacom Group as enlarged by the transaction.
Vodacom Group has agreed terms with Royal Bafokeng Holdings (RBH), Thebe Investment Corporation (Thebe), YeboYethu (existing BEE partners) and a newly formed staff scheme, whose combined interests will be consolidated into a new YeboYethu BEE structure that will own shares in Vodacom Group.
Vodacom Group is the largest mobile network operator in South Africa with significant operations in Lesotho, Tanzania, the Democratic Republic of the Congo, Mozambique and Kenya, through Safaricom.
This transaction, which remains subject to regulatory and shareholder approvals, will be the largest ever broad-based BEE transaction in the telecommunication industry.
It will replace and build on the R7.5 billion Vodacom SA BEE ownership scheme that was concluded in 2008 and anticipated to unwind on 8 October 2018, ten years after its implementation. The existing transaction, comprising a 6.25% shareholding in Vodacom SA held by YeboYethu, RBH and Thebe has delivered meaningful value to its participants benefitting over 102,000 YeboYethu investors and 8,500 current and past Vodacom SA employees.
The new BEE transaction, in which the YeboYethu shareholding will be substantially increased, will be funded through a combination of third party and vendor financing, reinvested equity of R4.5 billion from the existing BEE partners and facilitation from Vodacom Group. The new transaction has a 10-year funding term, extending the relationship between Vodacom Group and YeboYethu, as its BEE partner, for at least the next 10 years, with the possibility to extend beyond that period.
A critical component of the transaction will be Vodacom SA employees, 4,637 of whom will participate in a new staff scheme funded by Vodacom Group to the value of R3.5 billion. Through this vehicle, employees will own approximately 20% of YeboYethu.
Shameel Joosub, the CEO of the Vodacom Group, said: “It was crucial for us to retain our empowerment shareholding but at the same time, go one step further. Our intention was always to move our BEE investors from being shareholders in Vodacom South Africa to a shareholding at the Group level thereby giving them exposure to the broader local and international markets in which Vodacom Group trades. YeboYethu’s shareholding in Vodacom Group will increase to around 6.25%, giving Vodacom Group an effective BEE shareholding of c.20%.
“Our original BEE deal has delivered significant value to our BEE partners. Its unwind will deliver approximately R7.5 billion of value, or 6.7x the original capital our BEE partners invested into the 2008 transaction. This is considered one of the most profitable and successful value realisations by any BEE transaction concluded in South Africa to date. A shareholder that invested the minimum R2,500 in 2008 will unlock approximately R16,000 of value through this deal.
“Part of this value will be returned to our existing BEE shareholders in the form of an upfront special dividend of R3 billion, which provides substantial liquidity for our partners and amounts to 2.7x the original capital they invested into the 2008 deal. A shareholder that invested the minimum R2,500 in 2008 will receive circa R6,000 in cash.
Our new BEE transaction goes further still. It is a resolute commitment by our broader Group to deliver a broad-based, inclusive, well-governed and highly transparent empowerment process. Importantly, YeboYethu shareholders can continue to trade their YeboYethu shares at any point, and will now own a more liquid and tradeable share given YeboYethu’s shareholding in Vodacom Group.”