UAE's Etisalat Pays $4.4 Billion for Almost 10% of Vodafone

In Business
2022-05-14 10:44:08Z
By Bloomberg

(Bloomberg) -- UAE phone company Etisalat Group said it bought a 9.8% stake in Vodafone Group Plc for $4.4 billion as the Middle Eastern telecommunications provider seeks to expand globally.

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Etisalat Group offered about 130 pence ($1.59 dollars) a share, according to Bloomberg calculations. That's a premium of about 10% to Vodafone's 117.82 pence closing price Friday. The purchase makes Etisalat Vodafone's largest shareholder, ahead of BlackRock Inc., the Vanguard Group Inc., and HSBC Holdings Plc, according to Bloomberg data.

The government-controlled company plans to remain a long-term investor and won't make an offer for the rest of Vodafone shares, Emirates Telecommunications Group Company PJSC, or e&, as the Abu Dhabi-listed group is formally known, said in a stock exchange statement.

Etisalat Group "made the investment in Vodafone to gain significant exposure to a world leader in connectivity and digital services" and aims to develop opportunities for commercial partnerships, it said.

The purchase comes as Vodafone faces pressure from activist investor Cevian Capital AB, which has called on the telecoms giant to simplify its business and pursue deals to improve returns. The company is in talks to combine its UK operations with rival operator Three UK, owned by CK Hutchison, the Financial Times reported earlier this month.

Read More: Activist Investor Coast Capital Builds Stake in Vodafone (1)

For its part, Etisalat is stepping up deal activity after sitting on the sidelines and focusing on organic growth in recent years. UAE's largest telecoms player, is also seeking to buy out the rest of its Saudi Arabian unit in a $2.1 billion deal. Etisalat built has a presence in several emerging market countries in Asia and Africa in a previous expansion but had to write downv some of its investments in countries like India.

Etisalat's stake purchase in Vodafone comes after French billionaire Patrick Drahi accumulated an almost 20% stake in BT Group Plc. Drahi, the president of telecommunications company Altice, has said the BT stake is a financial investment.

Read More:Drahi Tightens Grip on BT's Future, Raises Stake to 18% (3)

The United Arab Emirates has developed as a business and tourism hub of the Middle East. The Persian Gulf state has parlayed its oil wealth into developing technology and logistics industries and seeking to attract investment for advanced manufacturing.

Like larger neighbor and business rival Saudi Arabia, the UAE is looking to prepare its economy for a post oil era and create jobs for its citizens. The countries, both members of the Organization of Petroleum Exporting Countries, are investing their wealth into growth industries abroad. Saudi Arabia has ploughed funds into Masayoshi Son's Softbank Vision Fund and into electric carmakers, while Abu Dhabi last year listed its semiconductor maker Globalfoundries Inc.

"Our investment represents a unique opportunity to acquire a significant stake in one of the leading and strongest global telecom brands," Etisalat Chief Executive Officer Hatem Dowidar said in the statement.

(Updates with background on Etisalat in sixth-seveth paragraphs)