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Vodacom Group announces today that it has agreed terms to acquire a strategic stake in Kenya’s Safaricom held by Vodafone Group plc. Subject to regulatory and shareholder approvals, Vodacom will fund the acquisition of a 34.94% stake in Safaricom by issuing 226.8 million new ordinary shares. The transaction is set to further enhance Vodacom as a leading African mobile communication company.
Based on Friday’s JSE closing price of R152.49 per Vodacom share, this values the proposed transaction at R34.6 billion. This represents a 5.9% discount to the Safaricom share price on the Nairobi Securities Exchange at closing ahead of the announcement.
Commenting on the proposed transaction, Shameel Joosub, Chief Executive Officer of Vodacom Group, said: “This is an exciting occasion for Vodacom and a unique opportunity to diversify our revenue growth and profitability. Acquiring a strategic stake in Safaricom will provide our shareholders with access to a high growth, high margin, high cash generation business operating in a high growth market. In addition to producing mutually beneficial opportunities for growth, it will create further incremental value through the close cooperation between the two businesses, particularly in driving M-Pesa adoption across our operations.”
Safaricom’s leading mobile money platform, M-Pesa, is an important driver of Kenyan economic growth, providing essential financial services to over 19 million customers. The proposed transaction will improve Vodacom Group’s presence in East Africa, jointly increasing the company’s growth in financial services customers to 32 million, making it a formidable player in financial services on the continent.
Vodacom’s interest in Safaricom proportionally equates to approximately 12.6% of the Group’s reported service revenue as announced in its latest year end results. The transaction provides a large level of diversification in a single transaction and Safaricom is highly complementary to Vodacom Group’s existing footprint.
Joosub adds: “We have negotiated what we believe is an attractive price for access to an additional 28.1 million customers and one of the most successful and innovative telecoms companies in Africa. The transaction will be financially accretive for Vodacom’s shareholders based on FY17 results, excluding the effects of amortisation on intangibles created on acquisition, and will further enhance our investment case and strategic position. Given that this is a related-party transaction, appropriate governance controls have been implemented to ensure that the transaction was and is negotiated, evaluated and executed on an arm’s length basis.”
Vodacom appointed an independent expert, Deloitte & Touche, to provide a fairness opinion on the proposed transaction, which will be included in the circular that will be distributed to shareholders ahead of a General Meeting in August 2017 at which minority shareholders will vote on the matter. As this is a related-party transaction, Vodafone, which currently owns 65% of Vodacom, is precluded from voting on this at this meeting.
Detailed announcement - acquisition of interest (679KB)