Vodafone to Acquire 15% Government Stake in Safaricom Plc
Safaricom Plc announced a proposed transaction between Vodafone Kenya (a subsidiary of Vodacom Group Limited), the Government of Kenya and Vodacom Group Limited. Vodafone Kenya issued a notice of intention to Safaricom Plc stated that Vodafone Kenya Limited is intending to purchase an additional 15% stake of Safaricom shares that are currently held by the Government of Kenya. Additionally Vodacom Group Limited, the 87.5% majority shareholder of Vodafone Kenya, will also be purchasing 50 Vodafone Kenya ordinary shares which represents a 12.5% stake of Vodafone Kenya.
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Vodafone Kenya Limited and the Government of Kenya
Vodafone Kenya (a subsidiary of Vodacom Group Limited) intends to purchase an additional 6,009,814,200 Safaricom’s shares from the Government which is equivalent to a 15% stake of Safaricom.
The purchase of the 15% additional shares at the acquisition price of KES 34.00 per share will amount to a total of KES 204.3Bn which is approximately USD 1.6Bn.
Upon completion, the Government of Kenya’s shareholdings will shrink from 35% to 20% and Vodafone Kenya’s holdings will grow to approximately 55% from a 39.93% .This leaves the general public investors with 25%.
Vodafone Kenya clarified that they have no intention for a takeover despite surpassing the 51% shareholding in Safaricom and will be seeking an exemption from the regulator for the same.
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Internal re-organization of Vodacom Group
Vodacom Group Limited, the 87.5% majority shareholder of Vodafone Kenya, will acquire an additional 12.5% stake in Vodafone Kenya or 50 ordinary shares resulting in an 100% control in Vodafone Kenya. Through this acquisition the company will also have a 4.99% stake in Safaricom Plc from the above purchase.
The acquisition of the 50 shares will constitute to a total of KES 68.1Bn which approximately USD 0.5Bn.
Once completed Vodacom Group Limited will directly have a 100% stake in Vodafone Kenya share capital and approximately a 55% stake in Safaricom share capital indirectly.
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Dividend Transfer
Vodafone Kenya will buy the right to receive future Safaricom dividends corresponding to KES 40.20Bn for the governments remaining 20% stake.
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Our view on the acquisition
The acquisition happens at a premium implying that the counter is trading at a discount of 20.6% at the current market price of KES 28.20 per share against the acquisition level. The acquisition price of KES 34.is 5.5% below our earlier target price of KES36.0 per share.
The acquisition does not affect Safaricom’s market liquidity since the acquired shares will not be traded by the acquirer.
