Mergers, Acquisitions and Financial Results

The R21bn investment into SA by the UK-based Vodafone was given the go-ahead despite a last-minute objection lodged with the Competition Tribunal by a little-known black empowerment grouping.

The objection failed to derail the deal, with the parties describing it as too late to be taken seriously. After a brief hearing the tribunal granted permission for Vodafone to buy out VenFin, creating SA's largest direct foreign investment since Barclays bought into Absa for nearly R28bn.

Vodafone will pay R47,25 a share purely to obtain VenFin's 15% stake in cellular operator Vodacom. Vodafone will sell all VenFin's other assets -- including shares in Dimension Data, and Alexander Forbes -- for R5bn to a company owned by the Rembrandt Trust.

At the end, Vodafone will have bumped up its 35% in Vodacom to 50% for about R15,6bn.Last week the HBR Foundation, a community-based organisation, urged the tribunal to veto the deal as it did not enhance black empowerment and was an abuse of a dominant position.

Its letter was faxed to the tribunal at 9.49am, delaying the start of the 10am hearing.

"I am reluctant to take heed of it, but we got a letter a couple of minutes ago opposing the merger from the HBR Foundation, objecting to the fact that this asset was sold to Vodafone instead of to a black economic empowerment group," said tribunal chairman David Lewis (pictured).

After a quick discussion with VenFin and Vodafone representatives, VenFin's attorney, Johannes Gouws, said he did not believe the letter was admissible at that late stage in the proceedings.

"Vodafone made an offer to VenFin, a listed company, and there is nothing VenFin can do to affect that situation," Gouws said.

"If this consortium or any black empowerment consortium is interested in buying these shares they can make an offer just like any third party is able to do."

HBR submitted its objection in partnership with Mybico, an organisation for young businessmen. They said VenFin should be made to offer its shares in Vodacom to black investors at R47,25 a share, or at a subsidised value.

If no black buyer was found, the shares could be warehoused by government until a black group was able to take the stake, they proposed.

Telkom owns the other 50% of Vodacom, and had a pre-emptive right to buy the other half if the shares had been sold in isolation.

VenFin financial director Jannie Durand said that selling the Vodacom shares as a job-lot with VenFin's other assets was not designed to circumvent Telkom's rights.

"Telkom was part of the process and also made an offer to the Rembrandt Trust for the shares, but the bid from Vodafone was higher."

The deal was designed primarily to avoid capital gains tax that would have been levied if the Vodacom shares were sold in isolation.

Durand said that VenFin had no qualms about selling out of Vodacom now -- even though Africa's telecommunications sector was booming.

"We are a private investment firm and we have been in Vodacom for 10 years. We need to start realising some of our assets at an appropriate time.

"The price we are getting is pretty good for our shareholders and made them all very happy."

Business Day