The Public Investment Corporation (PIC) is disposing of a portion of the stake it acquired in local mobile giant Vodacom earlier this month, as part of a risk mitigation move.
The investment management company, which represents the Government Employees Pension Fund (GEPF), announced on 1 July that it had bought government's 13.91% equity stake in SA's largest mobile operator. The transaction, said to be worth more than R28 billion, was prompted by government's need to help finance a R23 billion bailout allocation for struggling power utility Eskom.
The PIC now says it is looking to sell 25 million ordinary shares in Vodacom, representing approximately 1.7% of the company's issued share capital, and has appointed Deutsche Bank to facilitate the sale.
"This placement is in relation to a hedging activity in respect of certain risk mitigation arrangements entered into by Merrill Lynch International with the GEPF," says the corporation.
Following this transaction, the PIC says it has agreed to a lock-up period of 60 days on its remaining Vodacom stake.
While the entity would not provide further details pertaining to the transaction, a PIC spokesperson says the motivation behind the move is primarily risk mitigation. He points to the corporation's original statement, in which it discussed the motivation behind its purchase of the Vodacom stake: "It will further assist the PIC with portfolio diversification as well as risk mitigation and is in line with the PIC's investment mandate and objectives."
Quick profit?
Therefore, the emphasis of the proposed transaction to offload the 25 million ordinary shares in Vodacom is a continuation of the risk mitigation strategy, explains the spokesperson. This comes as market watchers allege the PIC is flipping the shares for a quick profit.
Ovum senior analyst Richard Hurst says it is difficult to accept the PIC's reasons for the share sale. "I don't really see much in the sense of risk mitigation. Frankly, it does strike one as simply being what it looks like: just flipping the stake for a quick profit.
"It looks like this has been a multi-step process, with government selling the stake to the PIC and the PIC now selling the shares on the market. Therefore, it seems they've convoluted something and created it simply for the profit of the PIC."
At yesterday's closing price of R134.66, the 25 million Vodacom shares are worth about R3.4 billion - 10% up on the price the PIC paid at the beginning of the month.
Vodacom has a market capitalisation of R201.7 billion and 65% of the company is held by UK-based mobile operator Vodafone, after it purchased Telkom's 15% stake in November 2008, for about R22 billion.
The PIC is now Vodacom's second-largest shareholder, having already owned 3.19% of Vodacom prior to buying out government's stake a few weeks ago.
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