Deal to sell 35% stake exposes Safaricom to takeover by Vodacom

Safaricom ownership structure is set to undergo a major transformation with the exit of one of its two biggest shareholders in what could make the mobile operator a target for a possible takeover.

Vodafone Group has today morning announced that it is selling 35% stake of its 40% shareholding in Safaricom, Kenya’s leading mobile services operator, to Vodacom South Africa.

Plotting a hostile bid?

Under the terms of the agreement, Vodafone will exchange a 35% indirect interest in Safaricom for new ordinary Vodacom shares and will continue to hold a 5% indirect interest in Safaricom, in addition to the interest held through Vodacom, according to a statement from the two companies.

The transaction’s proponents say the share deal is expected to accelerate the mobile operator’s expansion into international markets – and it’s backed by an international marketing blitz – but analysts see the initial steps for an eventual bid by Vodacom, even a hostile one, a move that its parent company may not have been able to easily execute.

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Since Vodacom South Africa is 65 percent owned by Vodafone PLC, a takeover of Safaricom by Vodacom would put the control of Africa’s biggest mobile operators under the London-based Vodafone. This would give leeway to Vodafone (through Vodacom) to push M-Pesa into bigger markets especially in Europe and Asia and is likely to push for the proposed spinning of M-Pesa from Safaricom into an independent unit.

The deal will also increase expand shareholders number. Currently, the Government of Kenya 35% in Safaricom, Vodafone 40%, Mobitelea Ventures Ltd, 5% while the rest is owned by the public through shares listed at the Nairobi Securities Exchange. The new structure will have Vodacom at 35% while Vodafone will retain 5% just as little know Mobitelea.

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As part of the transaction, Vodafone Group has given appropriate assurances to the Government of Kenya to ensure the ongoing success of the longstanding partnership between Safaricom, Vodafone Group and the Government of Kenya.

As part of the transaction, Vodafone Group has assured that the longstanding partnership between Safaricom, Vodafone Group and the Government of Kenya would be preserved.

The CEO of Safaricom, Bob Collymore says the agreement Vodafone Group has reached with the Government of Kenya will ensure Safaricom continues to have strong Kenyan representation at Board and management levels.

“It also promotes the continued successful expansion of the company as well as the opportunity to drive M-PESA to other markets in the continent,” he said in a statement.

Completion of the transaction is, however, subject to a number of conditions, including approvals from Vodacom minority shareholders and the Financial Surveillance Department of the South African Reserve Bank as well as confirmation from the Kenya Capital Markets Authority that the transaction does not trigger an obligation for Vodacom to make a mandatory bid for Safaricom.

SAFARICOM’S POSITION STATEMENT

 Vodafone transfers a 35% interest in Safaricom to Vodacom

 Nairobi– May. 15, 2017…Safaricom (NSE: SCOM) notes today’s announcement by Vodafone Group Plc (“Vodafone Group”) regarding the proposed transfer by its wholly-owned subsidiary, Vodafone International Holdings B.V. (“Vodafone”), of part of its indirect interest in Safaricom to Vodacom Group Limited (“Vodacom”), its sub-Saharan African subsidiary. Under the terms of the agreement, Vodafone will exchange a 35% indirect interest in Safaricom for new ordinary Vodacom shares and will continue to hold a 5% indirect interest in Safaricom, in addition to the interest held through Vodacom.

As part of the transaction, Vodafone Group has given appropriate assurances to the Government of Kenya to ensure the ongoing success of the long standing partnership between Safaricom, Vodafone Group and the Government of Kenya.

The CEO of Safaricom, Bob Collymore, said: “The agreement Vodafone Group has reached with the Government of Kenya will ensure Safaricom continues to have strong Kenyan representation at Board and management levels, and promotes the continued successful expansion of the company as well as the opportunity to drive M-PESA to other markets in the continent.”

Conditions to completion and indicative timetable

Completion of the transaction is subject to a number of conditions, including approvals from Vodacom minority shareholders, approval from the Financial Surveillance Department of the South African Reserve Bank and confirmation from the Kenya Capital Markets Authority that the Transaction does not trigger an obligation for Vodacom to make a mandatory bid for Safaricom.

Earlier, international media house, Bloomberg, had reported that Vodafone PLC through its South African subsidiary, Vodacom Group Ltd was set to acquire the entire 35% stake owned by the Kenyan Government for approximately Ksh284 billion ($2.75 billion), causing a lot of excitement on social media.

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Last week, Safaricom announced its full year 2017 results reporting an increase of 27.1% in net income to a record Ksh48.4 billion, driven mainly by M-Pesa revenues which increased by 32.7% to Ksh55.1 billion.

Safaricom will begin its 2017 international showcase from Monday 15th to 17th May in London to showcase the Full Year 2017 results and its earnings potential. From 18th to 30th May, the Roadshow will move to Copenhagen, Stockholm, Paris, Chicago, Johannesburg and end up in Cape Town on 30th.

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