South Africa Sold Vodacom Stake to PIC at $229 Million Discount

South Africa sold its stake in wireless company Vodacom Group Ltd. at a 2.8 billion rand ($229 million) discount in order to raise funds to shore up state-owned power utility Eskom Holdings SOC Ltd.

“There was a discount of 10 percent based on the fact that it’s such a large transaction,” Phumza Macanda, a spokeswoman for the National Treasury, said in an e-mailed response to questions on Wednesday. “We are anticipating that the proceeds will be in excess of 23 billion rand that we will allocate to Eskom.”

The sale price to the state-owned Public Investment Corp. was 120.5 rand, or 10 percent below Vodacom’s 30-day volume-weighted average price of 133.89 rand, according to data compiled by Bloomberg. That means the government raised 24.9 billion rand from its 13.91 percent stake, 2.8 billion rand below the market value calculated on the same basis.

“It’s disgusting,” David Shapiro, a director at Johannesburg-based money manager Sasfin Securities, which owns Vodacom shares, said by phone. “The deal should have been offered to the whole market. Why not do a bookbuild? Government would have probably got more money or at least have seen what the market was prepared to pay.”

The PIC’s offer was “the best deal,” Finance Minister Nhlanhla Nene said in an interview in Pretoria on Wednesday. “We had a market-sounding exercise. It is through that market-sounding exercise that this transaction was in the best interest of all.”

The Treasury didn’t immediately respond to e-mailed requests seeking further details on the discount.

Power Shortage

South Africa needs to raise funds for a 23 billion-rand bailout package for Eskom, which is building new plants to resolve the power shortage in the continent’s second largest economy. The utility has a 225 billion-rand cash-flow shortfall and has been carrying out scheduled blackouts every other day this year as demand exceeds supply from aging power stations.

Vodacom shares gained as much as 4.9 percent to 145.52 rand, a more than six week high, and traded 3.1 percent higher as of 3:35 p.m. in Johannesburg. The unit of Vodafone Group Plc was granted provisional approval by South Africa’s Competition Commission to buy Internet provider Neotel Pty Ltd. for 7 billion rand on Tuesday.