Tuesday, May 16, 2017

Vodafone to transfer 35% interest in Safaricom to Vodacom

Vodafone Group announced that its wholly-owned subsidiary, Vodafone International Holdings B.V., has agreed to transfer part of its indirect shareholding in Safaricom, serving around 28 million subscribers in East and Central Africa, to Vodacom Group, its sub-Saharan Africa subsidiary.

Under the terms of the transaction, Vodafone will exchange a 35% indirect interest in Safaricom for 226.8 million new ordinary Vodacom shares. The transaction, which is valued at approximately Euro 2,361 million based on Vodacom's closing share price on May 12th, 2017, will increase Vodafone's ownership in Vodacom from 65% to 70%. Vodafone will continue to hold a 5% indirect stake in Safaricom following the transfer, in addition to the indirect interest held via Vodacom.

As part of the transaction, Vodafone Group has provided assurances to the government of Kenya relating to the ongoing operation of the long standing partnership between Safaricom, the Vodafone Group and the Kenyan Government.

The transaction is expected to allow Vodafone Group to streamlines and simplify the management of its sub-Saharan African holdings and to strengthen alignment and cooperation between Safaricom and Vodacom throughput the region and internationally. More specifically, Vodacom will strengthen its position in the Kenyan market.

Vodafone currently holds a 40% indirect interest in Safaricom through wholly-owned subsidiary Vodafone Kenya (VKL). Vodacom has agreed to acquire an 87.5% shareholding in VKL, representing a 35% indirect interest in Safaricom; Vodafone will retain the remaining 12.5% shareholding in VKL, representing a 5% indirect interest in Safaricom.

As part of the transaction, Vodacom is to issue 226.8 million new ordinary shares to Vodafone, which values the effective 35% indirect interest in Safaricom at approximately Euro 2,361 million. The implied exchange ratio of 1.62 new Vodacom shares for every 100 Safaricom shares compares to an implied exchange ratio of 1.56 based on the 90 day VWAP, 1.63 based on the 180 day VWAP and 1.72 based on the closing prices on May 12th.

After closing of the transaction, Vodafone will continue to report direct and indirect holdings in Safaricom under the equity method. Vodafone noted that closing of the transaction is subject to conditions including approvals from Vodacom minority shareholders, from the Financial Surveillance Department of the South African Reserve Bank and confirmation from the Kenya Capital Markets Authority that the transaction does not obligate Vodacom to make a mandatory bid for Safaricom.

The transaction is currently expected to close in the third quarter of 2017.