Deal Overview
Vodacom, through Vodafone Kenya, is set to acquire a majority stake in Safaricom by purchasing 15% of the Government of Kenya’s issued shares. This transaction is valued at $1.6 billion (KSh 204.3 billion). The proposed deal will increase Vodacom’s stake in the telecommunications company from its current 40% to 55%.
The confirmation of this significant transaction was included in a Safaricom statement released on Thursday. The company indicated that it had been formally notified of the intention regarding a substantial Proposed Transaction.
Under the terms of the agreement, Vodafone Kenya will acquire an additional 15% of Safaricom’s issued shares directly from the Government of Kenya (GOK). This represents 6,009,814,200 ordinary shares. The acquisition price is set at KES 34.00 per share, which collectively values the transaction at KES 204.3 billion, approximately equivalent to USD 1.6 billion.
Following this transaction, Vodacom will hold a 55% stake in Safaricom. The Kenyan government and public investors are expected to retain approximately 20% and 25% of Safaricom’s shareholding, respectively.
Safaricom is recognized as the largest mobile provider in Kenya, serving roughly two-thirds of the country's subscribers. The company is currently valued at approximately $8.9 billion (KSh 1.19 trillion), positioning it as one of the most valuable companies in the East African region.
As a component of this deal, Vodacom will also acquire Vodafone International Holdings’ 12.5% stake in Vodafone Kenya. This move will result in Vodacom becoming the sole owner of Vodafone Kenya.
The statement further elaborated that the GOK Share Acquisition and the Vodafone Kenya Acquisition are inter-conditional shareholder-to-shareholder transactions and are anticipated to be finalized simultaneously.
Government's Rationale and Financial Implications
For the Kenyan government, the sale of 15% of its Safaricom shares represents a significant strategic decision. The government aims to bolster its revenue streams to address escalating debt levels and reduce budget deficits. A portion of the proceeds from this sale, which is expected to generate substantial profit, could provide a considerable influx of capital to help improve the nation's financial standing.
Takeover Regulations and Exemption Request
While the acquisition of additional shares will grant Vodacom significant control over Safaricom, there have been expectations regarding a potential complete takeover. Such a scenario would typically trigger specific regulations, including sections 3(1) and 4 of the Takeover Regulations.
However, Vodacom has stated that it does not intend to initiate a takeover offer. Instead, the company plans to seek an exemption from the Capital Markets Authority of Kenya (CMA). This exemption would allow Vodacom to maintain control of Safaricom without being obligated to make an offer to acquire the remaining 45% of shares from other stakeholders.
The statement clarified: "Vodafone Kenya does NOT intend to launch a takeover offer of Safaricom. In this regard, Vodafone Kenya will be applying to the Capital Markets Authority of Kenya (“CMA”) for an exemption under regulation 5(1) of the Take-over Regulations from complying with the mandatory take-over procedures set out in regulation 4 of the Take-over Regulations."
As part of the transaction, Vodacom will pay the GOK KSh40.2 billion upfront. This payment is in exchange for future dividends that the GOK would have otherwise received from its 20% stake in Safaricom.
The completion of this proposed transaction is contingent upon securing approval from both the CMA and the Kenyan Cabinet.
This proposed stake increase would not be Vodacom's first in Safaricom. In 2017, the company previously increased its holding through a share swap arrangement with its UK parent company, Vodafone.