Vodacom Said to Weigh $1.1 Billion Stake Sale to Black Investors

  • South African company plans to buy back shares from the PIC
  • Wireless operator seeks to increase black ownership with deal

Vodafone Group Plc’s South African unit is considering the sale of a 15 billion rand ($1.1 billion) stake in what would be one of the country’s biggest-ever deals aimed at boosting black participation in the economy, according to two people familiar with the matter.

Vodacom Group Ltd. plans to buy back part of the 12.47 percent stake owned by the government’s pension-fund manager, the Public Investment Corp., said the people, who asked not to be identified because the deliberations are private. The shareholding could then be listed as a separate entity restricted to black investors, they said. Negotiations with the PIC are ongoing and an outcome is expected in coming months, said one of people.

“Vodacom is committed to delivering on the ideals of black economic empowerment and continue to explore a variety of options with the primary objective of broad-based inclusivity,” a spokesman said in e-mailed comments, without directly commenting on whether such as a transaction is being considered. “Any transaction of this nature will be conducted through a well-governed, highly transparent process.”

Replacement Program

The deal would help South Africa’s market leader in terms of mobile subscribers to comply with a government initiative to help compensate those discriminated against during apartheid. Under new guidelines effective Nov. 7, telecommunication companies should aim to be 30 percent black owned, a third of which must be held by black women. With Vodacom’s existing black empowerment deal coming to an end in 2018, the company plans to put together a replacement program in line with the new policy, said one of the people.

Vodacom shares rose 0.6 percent to 151.95 rand as of 9:08 a.m. in Johannesburg on Thursday, valuing the company at 226 billion rand.

“It may be more optimal for Vodacom to buy its own shares back from the PIC and to implement a black empowerment offering with all the requisite groups” rather than a direct sale by the PIC, said Soria Hay, director of Bravura Capital in Johannesburg, which helps facilitate black economic empowerment transactions. 

The PIC, which manages government worker pensions and is Africa’s biggest money manager with 1.86 trillion rand in assets, acquired the Vodacom stake from the government in 2015. The Pretoria-based company has considered previous sales to consortiums of prominent black business people, one of which included former senior Vodacom executive Romeo Kumalo.

Double Down

Vodacom’s new empowerment program would be double the size of the 7.5 billion-rand plan that ends next year. Beneficiaries of that fund include employees and black-owned investment companies Royal Bafokeng Holdings and Thebe Investment Corporation who can sell their shares when the program ends. Cross town rival MTN Group Ltd. started a 9.9 billion rand empowerment plan at its South African unit last year that boosted its black ownership to more than 30 percent.

The governing African National Congress has pledged to ensure the country’s black majority secures a bigger stake in the economy as it seeks to claw back support lost in the wake of a succession of scandals implicating its leader, President Jacob Zuma. Many black South Africans are growing impatient at the slow distribution of wealth in an economy where whites still earn more than blacks and dominate the boards of most businesses.

“Radical economic transformation remains at the core of our economic strategy,” Zuma said at a rally this month to mark the ANC’s 105th anniversary. “More decisive steps must and will be taken to promote greater economic inclusion and to advance ownership and control and real leadership of the economy by black people.”

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