MERGERS, ACQUISITIONS AND FINANCIAL RESULTS
BID FOR ECONET'S NIGERIAN FIRM HITS MORE SNAGS
The proposed joint offer by Vodacom South Africa and UK's Virgin Mobile to take over a majority stake in the Nigerian mobile firm, Vee Mobile (formerly Econet Wireless), may face further hurdles in addition to the legal challenge by Econet.
This follows reports that some shareholders are beginning to question the motive behind the proposed purchase of the company by the two investors.
Media reports in Nigeria on Wednesday said some shareholders of Vee Mobile, set up by Econet in August 2001, feel that the bid by Virgin and Vodacom may not be in the best interests of the company in which Econet Wireless Limited is claiming pre-emptive rights to increase its stake in Vee Mobile.
One of the shareholders, who was not named, was quoted as saying that the joint bid by the "two strange bedfellows smells of conspiracy which may not be in our interest to move the company forward".
The shareholders believe that there is considerable value in the business and that shareholders should explore other opportunities to realise maximum benefit from any investment by an outside investor. Vodacom and Virgin announced late last week that they had formed a consortium to bid for US$750 million to buy a 51 percent stake in Vee Mobile, departing from their original separate bids to acquire the company currently embroiled in a shareholder dispute with Econet.
The dispute, which was originally referred to the Paris-based Permanent Court of Arbitration (PAC), has since been referred back to the Federal High Court of Nigeria, which is expected to convene an arbitration panel to hear the case.
Through its founder, Strive Masiyiwa, Econet is arguing that it has pre-emptive rights to acquire a larger stake in the firm. The company is also arguing that it owns 5 percent of the company and is contesting the decision by the shareholders and directors to allow outside investors to take a larger stake in the company without giving it first choice of refusal.
Econet this week issued a statement saying that its lawyers have already sent the directors of Vee Mobile formal notification that they would be cited for contempt of court if they attempt to sell any shares in the company before the arbitration process has been completed.
A spokesman said any reported negotiation or offer to sell shares was a flagrant violation of a court injunction issued on January 10 2005, which ordered Vee Mobile to refrain from taking any measures that would prejudice the rights of Econet.
He said the formal notification served on the Nigerian directors of Vee Mobile, known as "Form 48", was sent following media reports that the company was negotiating with Virgin and Vodacom to sell shares in the company, a spokesman said in a statement from Johannesburg.