Vodacom Group, its existing BEE partners and a newly formed staff scheme on Monday announced a broad-based BEE transaction of up to R17.5 billion that will see the BEE partners exchange their current shareholding in Vodacom South Africa (Vodacom SA) for a shareholding of between 5.8% and 6.25% in Vodacom Group as enlarged by the transaction.
The mobile operator said the deal represents the largest ever BEE transaction in the ICT sector that includes all existing BEE partners, and a new staff scheme.
Vodacom Group has agreed terms with Royal Bafokeng Holdings (RBH), Thebe Investment Corporation (Thebe), YeboYethu (existing BEE partners) and a newly formed staff scheme, whose combined interests will be consolidated into a new YeboYethu BEE structure that will own shares in Vodacom Group.
The transaction is subject to regulatory and shareholder approvals. It will replace and build on the R7.5 billion Vodacom SA BEE ownership scheme that was concluded in 2008 and anticipated to unwind on 8 October 2018, 10 years after its implementation.
The existing transaction, comprising a 6.25% shareholding in Vodacom SA held by YeboYethu, RBH and Thebe has delivered meaningful value to its participants benefitting over 102,000 YeboYethu investors and 8,500 current and past Vodacom SA employees.
The new BEE transaction, in which the YeboYethu shareholding will be substantially increased, will be funded through a combination of third party and vendor financing, reinvested equity of R4.5 billion from the existing BEE partners and facilitation from Vodacom Group.
The new transaction has a 10-year funding term, extending the relationship between Vodacom Group and YeboYethu, as its BEE partner, for at least the next 10 years, with the possibility to extend beyond that period, the operator said.
For Vodacom SA employees, 4,637, will participate in a new staff scheme funded by Vodacom Group to the value of R3.5 billion. Through this vehicle, employees will own approximately 20% of YeboYethu, the group said.
“Our original BEE deal has delivered significant value to our BEE partners. Its unwind will deliver approximately R7.5 billion of value, or 6.7x the original capital our BEE partners invested into the 2008 transaction. This is considered one of the most profitable and successful value realisations by any BEE transaction concluded in South Africa to date. A shareholder that invested the minimum R2,500 in 2008 will unlock approximately R16,000 of value through this deal,” said Shameel Joosub, CEO of the Vodacom Group.
“Part of this value will be returned to our existing BEE shareholders in the form of an upfront special dividend of R3 billion, which provides substantial liquidity for our partners and amounts to 2.7x the original capital they invested into the 2008 deal. A shareholder that invested the minimum R2,500 in 2008 will receive circa R6,000 in cash.”
Structuring the new YeboYethu deal
The new BEE transaction will see the Vodacom SA BEE shareholders settle their outstanding vendor funding. RBH and Thebe will then exchange their shareholding in Vodacom SA shareholding for shares in YeboYethu. Post this consolidation of the BEE shareholding in YeboYethu, YeboYethu will declare a R3 billion special dividend, or circa R67 per YeboYethu share, to its shareholders.
A new staff scheme, funded by a R1.05 billion contribution from Vodacom Group, will acquire YeboYethu shares from the existing Vodacom SA ESOP and subscribe for additional YeboYethu shares.
YeboYethu will then exchange its shareholding in Vodacom SA for shares in Vodacom Group. YeboYethu will issue R5.8 billion preference shares to third party banks and R4.7 billion preference shares to Vodacom Group and use the proceeds to subscribe for new shares in Vodacom Group. The R10.5 billion of preference shares funding that YeboYethu raises carries a very attractive pricing – approximately 69% of prime.
Following the transaction, Vodacom Group’s BEE shareholding will be consolidated in a reconstituted YeboYethu structure, which will remain listed on the BEE segment of the JSE.