Vodafone shares surged Friday after French billionaire Xavier Niel agreed to buy a 16.2% stake in the U.K. telecommunications company, becoming its largest shareholder.

Vodafone surges more than 12% in pre-market trading.

Niel, through his Vega acquisition vehicle, agreed to buy Emirates Telecommunications Group's entire stake in the British company for around 4.4 billion pounds ($5.9 billion) in cash.

Vega agreed to pay 110.5 pence a share for the stake, a 13% premium to Vodafone's closing price on Thursday. On top of that, the Emirati telecom group which is known as e&, will also receive Vodafone's final dividend of around 2 pence, bringing the total consideration to 112.5 pence a share.

Programmer-turned-telecom tycoon Niel, who founded French mobile and internet provider Iliad and co-owns the country's Le Monde newspaper, has built a portfolio of telecoms businesses across France, Italy, Poland, Switzerland, Cyprus and Ukraine among others. He also holds stakes in Nordic groups Millicom and Tele2 and recently bought a majority stake in Telefonica Chile. His family group's telecom investments and businesses generate around 24 billion euros ($27.43 billion) of annual revenue.

Vodafone offers a compelling investment opportunity, with quality assets, strong brands, leadership positions and a diversified geographic footprint, he said Friday.

"Vodafone is ready for a new phase of growth and is well-placed to unlock substantial untapped value across its European and African operations," Niel said in a statement.

e& said it decided to sell its stake so it can sharpen its strategic focus on core businesses while unlocking the value created through the investment. Its shares will be sold to three financial institutions that will hold the stock until Vega completes regulatory requirements.

As part of Friday's deal, e&'s representative on Vodafone's board has resigned with immediate effect. Hatem Dowidar was appointed to the board of Vodafone in 2023 as part of a deal that saw the Emirati group become a cornerstone investor in the British company.

Dan Coatsworth, head of markets at AJ Bell, said that if the deal is approved, it would represent yet another twist in the ever-changing ownership structure of U.K. telecoms groups after another French billionaire, Patrick Drahi, built up a 24.5% stake in BT before selling it to Bharti Enterprises in 2024 to help pay down his debt.

"The market has responded favorably to Niel's latest move, with certain investors possibly believing he might want to buy the whole of Vodafone in time," Coatsworth said. "That might not be the case, but it won't stop market speculation."

Vodafone said Friday that Vega doesn't intend to make an offer for the entire company.

(END) Dow Jones Newswires