Vodacom Group is winding up its broad based black economic empowerment deal (B-BBEE) and launching a new R17.5 billion chapter with a 10 years life span to 2028 in a series of complex actions. Here are the basic things you need to know about this deal.
What’s the deal?
In 2008, Vodacom facilitated a R7.5 billion B-BBEE deal where different groups acquired shares in its South African operations (Vodacom SA). The groups were YeboYethu, Thebe Investment Corporation, Royal Bafokeng Holdings and Vodacom SA employees (ESOP). That deal was set to mature this year.
Instead of liquidating the 2008 deal and distributing cash to investors, as it normally happens in B-BBEE deals, Vodacom has opted to extend the life of the deal by another 10 years to 2028 which makes for a new R17.5 billion formation.
The key features?
This extension comes with a couple of key features:
- A switch of exposure for the B-BBEE investors from Vodacom SA into Vodacom Group. This means the new deal will also yield benefits from Vodacom’s international operations. The deal is no longer limited to South African profits.
- A cash dividend of R73.00 per share for existing investors
- A consolidation of different Vodacom SA B-BBEE shareholders under one roof, being the JSE listed YeboYethu vehicle
- Further funding of R9.9 billion from Vodacom (R5.2 billion) and from third party funders (R4.6 billion) to acquire new Vodacom Group shares
- This will deliver to the B-BBEE partners, consolidated under the JSE listed Yebo-Yethu, a stake of about 6.25% in Vodacom Group.
What happens to my YeboYethu shares on the JSE?
Your YeboYetho shares will remain listed on the B-BBEE section of the JSE and unless you trade (sell) they remain in place. And they stand to benefit from the switch into a new Vodacom Group B-BBEE chapter.
Is there an opportunity for new investors?
Yes there is an opportunity for new investors in so far as the trading of the YeboYethu shares goes on the JSE. New investors can gain exposure to the ensuing Vodacom B-BBEE deal by buying YeboYethu shares from the JSE.
At what price are YeboYethu shares trading?
The YeboYethu share price moves as per market activity on the JSE. The shares have been hobbling around R80.00 per share over the past three months and recently shot up to reach a high of R120.00 per share. They were quoted at R110.00 per share at the time of writing this article.
Have the initial YeboYetho investors made money out of this B-BBEE deal?
Yes, the deal is in the money. The amount made by each investor depends on how long they stayed in.
Established in 2008 YeboYethu was priced at R25.00 per share and more than 100 000 qualifying black investors participated. The shares were listed for trading on an over the counter platform in 2014 and their value had jumped to about R45.00 per share. The listing was moved to the JSE in 2016 by which time the share price was flirting with R60.00. The Yebo Yethu shares have risen steadily to now trade above R100.00 per share. That alone makes for a capital gain of more than 300% excluding dividend payment.
B-BBEE value further explained
Vodacom Group CEO Shameel Joosub explains that the original B-BBEE deal has delivered significant value to Yebo Yethu investors. “Its unwind will deliver approximately R7.5 billion of value, or 6.7-times 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.
“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 2.7-times the original capital they invested into the 2008 deal. A shareholder that invested the minimum R2,500 in 2008 will receive R6,000 in cash.”
Will I make money if I go in now?
It depends on a whole range of factors which we will discuss in the next article of this series.