Vodacom set to hold majority stake in Safaricom after $1.6bn stake acquisition

Vodacom, through Vodafone Kenya, is set to acquire a majority stake in Safaricom by acquiring 15% of the Government of Kenya’s issued shares, valued at $1.6 billion (KSh 204.3 billion). The proposed deal will ramp up Vodacom’s stake in the telecoms company from 40% to 55%.

The confirmation was contained in a Safaricom statement on Thursday. The company said it has been formally served with a notice of intention regarding a significant Proposed Transaction. 

Under the deal, Vodafone Kenya will acquire an additional 15% of the issued shares in Safaricom from the Government of Kenya (GOK), representing 6,009,814,200 ordinary shares. “The acquisition price is KES 34.00 per share, valuing the transaction at KES 204.3 billion (approx. USD 1.6 billion),” it said.

While the deal will see Vodacom hold a 55% stake, the Kenyan government and general public investors will retain approximately 20% and 25% of Safaricom’s shareholding respectively.

Safaricom, the largest mobile provider in Kenya with approximately two-thirds of the country’s subscribers, is valued at around $8.9 billion (KSh 1.19 trillion). This makes it one of the most valuable companies in East Africa.

As part of the deal, Vodacom will acquire Vodafone International Holdings’ 12.5% stake in Vodafone Kenya, thereby becoming the sole owner of Vodafone Kenya.

“The GOK Share Acquisition and the Vodafone Kenya Acquisition are inter-conditional shareholder-to-shareholder transactions and are expected to be completed simultaneously,” the part of the statement reads.

For the Kenyan government, selling 15% of its Safaricom shares is a significant move. The government seeks to increase revenue to handle growing debt and reduce budget deficits. Part of the sale, which will generate profit, could provide a large sum of money at once to help improve the country’s financial situation.

Also Read: Safaricom to raise $308m in bonds for infrastructure upgrade in Kenya and Ethiopia.

Safaricom: complete takeover issues

While the acquisition of additional shares gives Vodacom major control of Safaricom, there are expectations of a complete takeover. Moreover, this will trigger certain regulations, such as the 3(1) and 4 of the Takeover Regulations.

However, Vodacom does not intend to launch a takeover offer and will instead seek an exemption from the Capital Markets Authority of Kenya (CMA). This will allow Vodacom to maintain control without making an offer to acquire the remaining 45% from other stakeholders.

“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,” part of the statement reads.

Vodacom Group

As part of the deal, Vodacom will pay the GOK KSh40.2 billion upfront in exchange for future dividends that the GOK would have received from its 20% stake in Safaricom. Meanwhile, the completion of the proposed transaction is subject to obtaining approval from the CMA and the Kenyan Cabinet.

This would not be Vodacom’s first stake increase in Safaricom. In 2017, it raised its holding through a share swap with its UK parent company, Vodafone.