South African based cellco Vodacom has formally taken over the running of Econet Wireless Nigeria (EWN) having acquired a 50% plus one share stake. The takeover was completed on Monday, when Econet shareholders – headed by Oba Otudeko – voted overwhelmingly in favour of the deal. Vodacom bought 40 million shares for USD150 million, equating to approximately 33.3% of the company, and has agreements in place with shareholders to acquire shares on a pro-rata basis which will increase its holding to 50%.
The acquisition has not been without pitfalls and whilst Vodacom may finally have control, litigation is ongoing. The High Court in Lagos, has begun hearing a case brought by Econet Wireless International (EWI) against Vodacom. The court has given Vodacom 14 days to answer the charges brought against it by EWI, with full legal arguments expected to be presented by the two companies’ lawyers in early February. EWI, a founding shareholder in Econet Wireless Nigeria (EWN), claims that Vodacom induced a breach of contract when it approached EWN to buy a controlling interest in the Nigerian company. EWI claims that it had an option to take up additional equity in EWN, to the value of USD150 million, which was accepted by the board of the Nigerian operation in May this year, meaning that Vodacom’s later approach was ‘highly irregular’. EWI has submitted a claim for over USD1 billion in damages from Vodacom.
Meanwhile, in a separate development, EWN has failed for a fourth time in its bid to prevent the international arbitration between EWN and EWI from proceeding. EWN is seeking a perpetual order of injunction over EWI to prevent it making any further applications to the court regarding the shareholders’ dispute and preventing the international arbitration from taking place. As was the case with the three previous applications on this matter, the Lagos High Court dismissed the application by EWN.