(Bloomberg) —
Emirates Telecommunications Group Company PJSC bought a 9.8% stake in Vodafone Group Plc for $4.4 billion as the Middle Eastern technology provider seeks to expand globally.
The company, formerly known as Etisalat Group and now rebranded as e&, offered about 130 pence ($1.59) a share for the stake, according to Bloomberg calculations. That’s a premium of about 10% to Vodafone’s closing price of 117.82 pence on Friday. The purchase makes the UAE-based company the largest shareholder in Vodafone, ahead of BlackRock Inc., the Vanguard Group Inc., and HSBC Holdings Plc, according to Bloomberg data.
State-controlled e& plans to remain a long-term investor and won’t make an offer for the rest of Vodafone, it said in a stock exchange statement on Saturday. The group “made the investment in Vodafone to gain significant exposure to a world leader in connectivity and digital services” and wants to develop opportunities for commercial partnerships, it said.
Vodafone’s shares are up almost 5% this year, but still at almost half of a 2018-high and close to the lows of the dot-com crash in 2002.
The company is facing pressure from activist investor Cevian Capital AB to simplify its business and pursue deals to improve returns. Vodafone is particularly on the lookout for deals in the UK, Spain, Italy and Portugal to consolidate and increase scale.
“We look forward to building a long-term relationship” with e&, Vodafone said in a statement.
Read More:Activist Investor Cevian Is Said to Build Stake in Vodafone
Vodafone oversees a sprawling portfolio across more than 20 countries serving over 300 million wireless customers. Its European operations include units in the U.K., Germany, Italy and Spain. Vodafone is also a major player in sub-Saharan Africa and has a joint venture in India.
For its part, e& is stepping up deal activity after focusing on organic growth in recent years.
The company is seeking to buy out the rest of its Saudi Arabian unit in a $2.1 billion deal and has built a presence in several emerging markets in Asia and Africa. Its purchase of a stake in Vodafone echoes French billionaire Patrick Drahi’s accumulation of an 18% share in BT Group Plc. Drahi, the president of telecommunications company Altice, has said the BT deal is a financial investment.
Read More:Drahi Tightens Grip on BT’s Future, Raises Stake to 18%
E& could look to emulate Drahi’s move and increase its stake over time, James Ratzer, an analyst at New Street Research, wrote in a note Saturday. That would likely require talks with the UK government to set out the company’s thinking and court political approval before increasing it further.
“This move will certainly trigger a lot of future discussion -– certainly only two days before Vodafone’s full-year results,” Ratzer wrote in the note.
The UAE — in moves similar to that of larger neighbor and business rival Saudi Arabia — is looking to prepare its economy for a post-oil era, investing their wealth into growth industries abroad.
“Our investment represents a unique opportunity to acquire a significant stake in one of the leading and strongest global telecom brands,” e& Chief Executive Officer Hatem Dowidar said in the statement.
(Updates with analyst comment in 10th paragraph)
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