13 August 2019 Corporate & Commercial

Our corporate/M&A team advised Vodacom and YeboYethu in a BEE deal

Cliffe Dekker Hofmeyr represented Vodacom Group Limited (VGL), the leading South Africa-based mobile communications company; and YeboYethu (YY), VGL's main broad-based black economic empowerment (BEE) shareholder.

Our corporate/M&A team advised VGL and YY in a BEE deal, in terms of which the current shareholders in Vodacom's 2008 BEE deal reinvested their equity in Vodacom into VGL for a further 10 years and geared that equity to acquire greater exposure to VGL.

In terms of the deal, the current BEE shareholders of Vodacom consolidated their shareholdings in Vodacom into YY and YY exchanged those Vodacom shares for shares in VGL, the holding company of both Vodacom's local and cross-border operations. The current shareholders acquired further shares in VGL using debt funding from third-party funders and VGL.

As part of the transaction, a new employee share ownership scheme was also established for the benefit of Vodacom employees. Following the implementation of the transaction, YY holds circa 6% of VGL, and VGL's effective BEE shareholding has increased to circa 20%. As part of the deal, the current shareholders of YY also received a US$299.5 million special dividend. Our team advised on the structuring of the transaction, drafted and negotiated the transaction agreements and shareholder circulars, and obtained necessary dispensations to implement this one-of-a-kind transaction from various regulators including the Takeover Regulation Panel and the JSE.

The deal is significant in the South African market (i) as the largest BEE deal in the South African ICT sector to date; (ii) for delivering the best returns to shareholders of any listed BEE deal; (iii) as YY became the largest BEE vehicle on the BEE Segment of the JSE by market capitalisation; and (iv) for including the second-largest preference share issue in a BEE transaction by quantum.