Vodacom to acquire stake in Kenya's Safaricom for $2.59bn

Kathleen Mckinney
May 16, 2017

"Following the proposed transaction, Vodacom Group will occupy a leading position in its markets with approximately one third of sub-Saharan Africa's gross domestic product", the South African telecoms provider added.

In the deal, UK's Vodafone PLC will release 35 per cent of its Safaricom stake to the South African telcom in exchange for allocation of 226.8 million new shares in the transaction valued at Sh267.4 billion. The implied share subscription and set-off ratio for the number of new Vodacom Group shares to be issued, in respect of 87,5% of the 39,93% Safaricom shares held by Vodafone Kenya, is equivalent to 1.62 new Vodacom Group shares (cum dividend) for every 100 shares in Safaricom held by Vodafone Kenya.

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 has agreed to a two-year exemption from the rule with the bourse, the company said.

"I think by consolidating the African businesses, you could apply scale and target these markets to make a wider opening to Vodacom and Safaricom".

"This is an exciting occasion for Vodacom and a unique opportunity to diversify our revenue growth and profitability".

"Before they do anything with Ghana, they've got to do something about the float and the easiest way is to sell down their stake", said Allan Nichols, an analyst at Morningstar in Amsterdam. The combination with Vodacom "promotes the continued successful expansion of the company as well as the opportunity to drive M-Pesa to other markets in the continent", CEO Bob Collymore said in an emailed statement. As this is a related-party transaction, Vodafone, which now owns 65% of Vodacom, is precluded from voting on this at this meeting.

It will also help increase the use of Safaricom's popular M-Pesa money transfer service across Africa.

Shares in Vodafone closed up 0.02 percent at 210.9 pence, while Vodacom's share price was up 0.2 percent at 152.8 rand and Safaricom was up 1.2 percent at 20.50 shillings. Safaricom was little changed in Nairobi. Service revenue increased 5.6 percent to ZAR 52.07 billion driven by strong customer additions, with good progress on data and enterprise services.

Headline earnings per share climbed by 4,5% to R9,23, while Vodacom declared a final dividend of R4,35/share, taking the total dividend for the year to R8,30/share.

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