VenFin shares lift on BEE news

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 13 Jan 2006

News that Vodafone would sell part of its future Vodacom stake to a black economic empowerment (BEE) consortium has helped boost the VenFin share price as analysts and market players consider the long-term implications.

In mid-morning trade on the Johannesburg Stock Exchange, the VenFin share price was trading at R47.52, a slight premium to the R47.25 per share offer made by the UK-based mobile network giant`s offer to minorities.

The deal, one of the largest in South African corporate history, is structured so that Vodafone will buy the entire business of telecoms and media investment group VenFin, and then sell it back to an unlisted entity, while retaining VenFin`s 15% shareholding in Vodacom. Once the deal is completed, Vodafone will hold 50% of Vodacom along with fixed-line operator Telkom.

Analysts value the entire transaction at around R21 billion, and place a value of about R16 billion on the Vodacom 15% stake. This means that Vodacom, which is unlisted, would be valued at around R108 billion.

Paul Tighy, senior dealer at Andisa Securities, says an unusual trading situation is developing with the VenFin shares as they are now trading slightly higher than the offer price.

"Usually, the share price remains fairly static once an offer has been made and looks set to be accepted. However, it looks as though some people are speculating that Vodafone may have to pay up more."

Tighy says there could be other factors at play such as tax issues as the share movements have been small.

Had to be done

Old Mutual Asset Managers analyst Steve Minnaar says Vodafone probably felt it "had to make some sort of announcement". However, the exact nature of a future BEE deal is far from clear.

"It would make sense that Vodafone makes further announcements once the whole VenFin deal is done [at the end of this month], and then maybe look to sell part of its stake to a BEE consortium, along with Telkom also selling part of its stake as they would be 50/50 partners," he says.

A problem for analysts and investors is that the ICT empowerment charter has not been finalised. The charter, which aims for companies to sell up to 30% for empowerment purposes, caps this requirement at R7.5 billion.

"If Telkom and Vodafone had to each sell 3%, that would work out fine as it would be within the ICT charter guidelines and probably be affordable for a BEE consortium," Minnaar says.