VODACOM LOOKS AT R7.5BN BLACK CAP

Mergers, Acquisitions and Financial Results

Vodacom is planning to use an agreement thrashed out by the hi-tech sector to sell shares worth R7.5bn and still be considered sufficiently black-owned. The company said last week that numerous black empowerment entities were competing for its shares as it prepared to strike an empowerment deal. "All indications suggest that the size of the transaction will be in the vicinity of R7.5bn," said CEO Alan Knott-Craig.

Estimating the value of the company is difficult, but UK-based Vodafone paid R16bn for 15%, valuing it at R106bn. That was almost exactly a year ago, when Vodacom had far fewer subscribers than it has today. Although that figure included its operations in other countries as well as in SA, the local stake alone will now be worth at least R110bn.

Without the R7.5bn cap to soften the extent of black ownership demanded from SA's largest companies, Vodacom would have to sell shares worth about R33bn, and find partners able to take on that burden. Last week Knott-Craig said Vodacom was committed to the empowerment charter governing the information and communications technology sector.

The clause declaring that any company selling equity of R7.5bn would earn the maximum points for ownership -- no matter how much it is worth -- provoked criticism from smaller companies as being designed purely to protect heavyweights Vodacom, MTN and Telkom.

Vodacom's managers were working on proposals for equity participation by suitable empowerment entities and would submit their proposals to the board in March, said Knott-Craig.

"A large number of applications have been received from such entities," he said.

The deal is likely to see both its 50% stakeholders Telkom and Vodafone dilute their stakes equally, to avoid disrupting a fragile truce that gives neither of them a greater say in Vodacom's operations.

One bidder is a group of black hi-tech professionals led by Nkenke Kekana, a former chairman of Parliament's communications committee. Kekana expressed interest in buying into Vodacom a year ago, but Vodafone vetoed selling any shares until the government clarified its requirements for equity ownership.

Other partners in his consortium include the respected analyst John Poluta, formerly of JP Morgan, and Isaac and Benjamin Mophatlane, the founders of Business Connexion. Reuters has previously reported that groups led by businessmen Saki Macozoma and Tokyo Sexwale are also likely contenders.

Business Day