Vodacom Stake Back Up for Sale to Black Buyers in S. Africa

  • South Africa’s PIC said to sell about $446 million in stock
  • Several suitors vie for stake, including Vodacom’s chairman

A stake in Vodafone Group Plc’s publicly traded South African unit is back up for sale, following the collapse of a previous deal in May that was aimed at increasing black ownership of the phone carrier.

The Vodacom Group Ltd. stock being sold by South Africa’s Public Investment Corp. is valued at about 6 billion rand ($446 million), according to people familiar with the negotiations, who asked not to be identified because the discussions are private. That equates to about 2.6 percent of Vodacom, Africa’s biggest wireless carrier by market value.

The PIC is in talks with a number of black investors, according to Chief Executive Officer Dan Matjila, who declined to discuss the details. No favorite has emerged, and a deal structure hasn’t yet been decided, Matjila said by phone. One of the groups includes Vodacom Chairman Peter Moyo, one of the people familiar with the talks said. The PIC is Africa’s largest money manager with 1.86 trillion rand in investments, most of that overseeing South African government workers’ pensions.

An increase in black ownership would help Johannesburg-based Vodacom meet government rules that are part of the country’s effort to compensate those discriminated against during the apartheid era that ended in 1994. Vodacom is currently 18.7 percent owned by black investors, compared with 39 percent for crosstown rival MTN Group Ltd. A 30-percent black-ownership minimum was a condition in a South African broadband spectrum auction that was delayed in September, though those requirements are currently in flux.

Vodacom shares gained 0.8 percent to 147.49 rand by 3.48 p.m. in Johannesburg. The stock was raised from neutral to buy by Goldman Sachs on Wednesday.

NMT Capital

The Vodacom suitors include NMT Capital Ltd, a firm co-founded by Moyo, along with executives Sango Ntsaluba and Thabiso Tlelai. They started a predecessor to NMT Capital in 2002, with backing from the South African unit of London-based insurer and investment manager Old Mutual Plc, where Moyo was an executive. NMT’s only institutional investor is Old Mutual Life Assurance Co., according to the firm’s website.

To address potential governance issues relating to Moyo’s involvement, NMT will take part in a bigger consortium that won’t be led by Moyo, said Nsaluba, who is the the investment firm’s chairman.

“This is a deal that we liked as an investment company and we are looking at it,” NMT’s Nsaluba said. “We are comfortable that all corporate governance issues were dealt with at Vodacom.”

While the PIC doesn’t need Vodacom’s approval to sell its shares, the carrier takes an active role in increasing its black ownership. Any transaction would take place through a well-governed, transparent process, Vodacom spokesman Byron Kennedy said in response to a question about potential conflicts regarding Moyo’s role.

Moyo didn’t respond to an e-mailed request for comment.

Sale Abandoned

In May, the PIC abandoned a planned sale of shares in Vodacom to a group that included a former executive of the carrier, Romeo Kumalo. Kumalo isn’t participating in the current talks.

The government last year sold its 14 percent stake in Johannesburg-based Vodacom to the PIC for about 25 billion rand. The PIC now owns about 12 percent of Vodacom, while U.K.-based carrier Vodafone has about 65 percent. The stock has declined 4.4 percent this year, valuing the company at 217 billion rand.

About 88 percent of the PIC’s investments come from the South African Government Employees Pension Fund.

The auction of more than $1 billion of high-speed broadband spectrum in South Africa has been in limbo for several years as South Africa’s government and its telecommunications regulator debate broadband policy. A sale by the regulator was postponed from January in the face of fierce government opposition, and is now planned for May.

    Before it's here, it's on the Bloomberg Terminal.