Johannesburg - Vodacom [JSE:VOD] announced two share repurchase offers to minority shareholders on Wednesday.
The bids include an odd-lot offer to shareholders who own less than 100 Vodacom shares, and a specific offer to shareholders who hold between 100 and 500 shares.
These offers allow shareholders to sell stocks at a price of 5 661 cents per share - a 2% premium on Vodacom's Tuesday closing price - without incurring the usual transaction costs.
ICT analysts from Frost and Sullivan Spiwe Chireka said the buy-back offer may be a lucrative short-term proposal, as the group's immediate prospects are not favourable.
"Traditional business lines are not as lucrative as they have been in the past. We are expecting the next seven months to be really tough for them," she said. "If they can't wait for Vodacom to improve, shareholders should sell now. Portfolio manager of Cadiz Asset Management Mark Ansley said the practice is common. "You can imagine the costs of printing out glossy reports, the banking costs associated with paying out dividends and the administrative fees that go along with it. It really makes sense to just have material shareholders," he said.
These offers, which on average will have an effect on less than 1% of Vodacom's shares in issue, will reduce the administrative cost of servicing the approximately 86 000 shareholders currently owning between 1 and 500 Vodacom shares.
The price for both offers was calculated using the volume weighted average traded price on the JSE over 10 trading days, commencing January 25 2010 and ending February 5 2010, plus a 5% premium.
"We want to emphasise that as per the JSE listings rules, those persons holding less than 100 shares [odd-lot holders] must make an election to retain their shareholding if they do not wish to accept the offer," said Vodacom Group chief financial officer Rob Shuter.
If odd-lot holders do not make an election, they will automatically be regarded as having accepted the offer. However, specific holders who do not make an election to sell their shares will retain them.
A general meeting of shareholders will be held on March 4 at Vodacom's Midrand head office to approve the necessary resolutions to implement the offers.
The deadline for the offer is 12:00 on March 26.