ECONET UNFOLDS PLANS TO TAKE OVER VMOBILE READY WITH USD230M BID FOR MAJORITY SHARE
Econet Wireless Interna-tional says it is now ready to take up and fully pay for a 50 per cent plus one majority shareholding of cash-strapped Vmobile Nigeria, months after it had its management contract terminated. In an exclusive interview with This Day in Johannesburg, South Africa last week, the Group Chief Executive of EWI, Strive Masiyiwa, said that EWI is believes that the international tribunal will rule in its favour.
After the ruling of the tribunal, Masiyiwa said that EWI will then exercise its right of pre-emption over the failed Vodacom offer for the Nigerian company and it would then pay for the 50 plus one per cent shareholding offered to Vodacom.
He disclosed that before the board of directors of the Nigerian mobile company severed relationship with EWI, the plan by the Zimbabwean firm to buy 33 per cent of Vmobile which was on offer then at USD150 million, had been approved by the shareholders.
But rather than proceed with the EWI offer, he added that some members of EWN's board decided to severe relationship with EWI and offer a 50 per cent plus 1 share of the company to Vodacom and "we have since taken the case to arbitration."
"In fact, we now want to exercise our right of pre-emption on the Vodacom offer. We are before the arbitration saying we have right of pre-emption over the offer made by Vodacom. Never mind our original offer, we have rights of preemption.
"Because the board and the shareholders met to accept the offer from Vodacom, we have right of pre-emption over that offer. That offer was for 51 per cent. If the tribunal rules that we have right of preemption, we are going to be given 30 days to pay. And if we have USD230 million, that day money has to speak or forever hold its peace.
"That, interestingly is the irony of this whole thing. We set out only to buy 33 per cent with USD150 million. These guys (Vodacom) put up an offer. We are now claiming right of pre-emption over this offer. And we cannot claim rights of pre-emption over part of the offer, we have to claim rights of pre-emption over the entire offer.
"Now I have been quiet, the legal stuff is for the lawyers while I have only been interested in one thing: making sure my money is there should we win. We are only going to have 30 days. That money is there and I am just making sure it goes nowhere", he told This Day.
Masiyiwa who welcomed the Economic and Financial Crime Commission (EFCC) investigations into Vmobile and the Vodacom transaction lamented that "this issue should never have got to this. I am so grateful when I heard about this EFCC stuff, I said thank God, at last, the Nigerian government at least is now paying attention."
The EWI Group Chief Executive said he was very happy when the EFCC wrote to EWI to request "our own side of the story. We are very happy that an agency of government is interested in the whole issue and we are confident that the truth would soon come out and we would be vindicated."
Masiyiwa said that telecoms business is a public business but "some of my colleagues think it is a private business. No, we are not running a fish and chip shop. There are stakeholders in this business who have a bigger say than even us which is the general public. In this particular case, over a million people sit on this network. They deserve better services not this confusion of waking up one morning you are called Econet, now you are called Vodacom and then you have V whatever."
The Board of Directors of EWN, now Vmobile, had sacked Masiyiwa, its founding partner, as a director of the company November 10, 2003 for what was described as "abuse of his fiduciary rights by disclosing confidential company information and leaking confidential company documents to a third party."
According to the company, other reasons for Masiyiwa removal were his "refusal to take cognizance of the business interest of the company in considering the investment offers, but only thought about himself and his company" and "persistent embarrassment of the company by mounting pernicious media propaganda against the interest of the company, the staff and the shareholders".
"Please note that your seat on the Board of the company is hereby consequentially deemed as vacated with immediate effect and you are therefore not entitled henceforth, howsoever, to any of the rights and privileges that attach to the office of a director of the company neither do you have the attendant responsibilities, duties and functions thereof", the company's letter to him read in part.
The shareholdings structure of EWN (Vmobile) had been restructured few months after it got its licence in 2001 with the parent company, EWI, holding 5 per cent.
Before the restructuring exercise, the shareholding ratio of the company had EWI holding 40 per cent, First Independent Limited, a consortium of Nigerian investors, 40 per cent and First Bank of Nigeria 20 per cent .
The Nigerian consortium picked up the balance of EWI's shares, bringing its shareholding to over 60 per cent as a result of the alleged inability of Masiyiwa to remit funds to cover his shareholdings.
EWN's Board of Directors later at a meeting unanimously allotted 40 million shares out of a total of 120 million shares of the company to Vodacom, representing 33.3 per cent. According to the company, the value of the shares is USD150 million, which is the equity required.
The Board also resolved that all existing shareholders will sell off part of their shares on a pro rata basis to Vodacom to enable the company come up to 50 per cent plus one share.
Masiyiwa had opposed Vodacom's bid to take over the company accusing EWN's board of breaching contractual agreemtents. There had been a dispute between EWI and EWN when EWN board invited Orascom of Egypt and Vodacom to carry out due diligence on the Nigerian firm which resulted in EWI's filing for arbitration in a Lagos court.
EWI in its request said that the Board of EWN contravened a board resolution on November 29, 2002 which states "that the company is hereby authorized to raise additional equity as required by its business plan by private placement (targeted at existing shareholders, high networth individuals and institutional investors) subject to the proviso that the existing shareholders shall be given full allotment for the amount they applied for".
But Vodacom has since pulled out after taking over and entering into a management agreement with the Nigerian company. Vodacom pulled out because of a payment it said breached good corporate governance and trusts. This decision prompted the EFCC investigations.