Vodacom acquires Econet stake - or does it?

8 Oct 2003

According to reports from Lagos-based news daily THIS DAY, South African mobile services provider Vodacom Group has struck a deal to acquire a controlling stake in Nigerian GSM operator Econet Wireless Nigeria (EWN) for around USD600 million. In a press statement following an extraordinary general meeting in the capital yesterday, EWN said its shareholders had voted to accept Vodacom’s offer to acquire a controlling interest. Although no details have as yet been disclosed, it is understood that the South African cellco is set to take a stake of 50% plus one share in the company. Vodacom is thought to be ready to put down an initial USD260 million with a further USD300 million to follow as a loan in the equity and debt deal. Vodacom’s apparent success comes at the expense of rival bids by Orascom of Egypt and Econet Wireless International (EWI), and seemingly ends months of speculation over Voadcom’s aspirations in Nigeria. However, the outcome of the deal is far from clear cut. EWI, the current operator of EWN and a 5% stakeholder in the cellco, is believed to have filed a fresh court injunction to try to stop the deal. Having launched a legal bid a month ago to enforce a clause in EWN’s shareholder agreement giving its pre-emptive rights to purchase the company as an existing shareholder, EWI has now issued a second claim questioning the legality of the hastily arranged extraordinary meeting. EWI chairman Strive Masiyiwa validated the latest court action, clearly designed to block Vodacom taking control, saying ‘there was no proper notice issued for the meeting. It is quite astounding an EGM can be called without shareholders being properly notified according to the law’. A Federal High Court will rule on Thursday whether to hear the preliminary objection challenging the suit.