Vodacom announced on Monday that it is buying a 34.94% strategic stake in Kenya’s Safaricom held by its parent company Vodafone Group.
The deal is 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 company said the transaction is set to further enhance it 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.
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.
“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,” said Shameel Joosub, CEO of Vodacom Group.
“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.”
Joosub adds: “The transaction will be financially accretive for Vodacom’s shareholders based on FY17 results, excluding the effects of amortisation on intangibles created on the acquisition, and will further enhance our investment case and strategic position.”