Vodacom Group announced that it has agreed terms with Vodafone to acquire its controlling stake in Vodafone Egypt. Subject to regulatory and shareholder approvals, Vodacom Group will fund the acquisition of a 55 percent stake in Vodafone Egypt by issuing 242 million new ordinary shares at ZAR 135.75 per share and paying ZAR 8.2 billion in cash. This values the proposed transaction at ZAR 41 billion, or USD 2.738 billion.
Vodafone Egypt is the largest mobile network operator in Egypt with 43 percent revenue market share, offering a range of integrated telecommunications services including voice, data and mobile money services to 43 million consumer and enterprise customers. Telecom Egypt owns the other 45 percent of the operator.
Vodafone previously tried to sell the Egypt stake to Saudi Telecom Group, but was unable to reach a final agreement. The proposed sale to Vodacom is part of a string of transactions to consolidate its operations in Africa under the South Africa-based holding company.
Vodacom Group shareholders are expected to gain significant value by scaling its multi-product strategy or 'System of Advantage' into Egypt, the operator said. With more than 80 percent of Egypt’s 100 million population unbanked, there is a significant opportunity to leverage its financial services platforms, global partnerships and best practices into this market. In addition, Vodacom sees attractive synergy potential from combining Vodafone Egypt’s software factory with Vodacom’s existing big data capabilities, closer cooperation in scaling pan-African enterprise and IoT solutions, and talent sharing.
Vodacom Group appointed PwC 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 January 2022 at which minority shareholders will vote on the matter. As this is a related-party transaction, Vodafone, which currently holds a 60.5 percent stake in Vodacom Group, will be precluded from voting on the meeting. Once all of the conditions precedent are met pertaining to the proposed transaction, the acquisition is expected to conclude before 31 March 2022.
New dividend policies
On completion of the acquisition, Vodacom Group will simplify its dividend policy to at least 75 percent of headline earnings. The current policy is to pay at least 90 percent of adjusted headline earnings, excluding the contribution of Safaricom, and additionally pass-through Safaricom dividends received.
Vodafone already agreed a new dividend policy for the Egyptian business in June with Telecom Egypt. As part of that deal, the operator gained additional rights to transfer its stake in Vodafone Egypt within the group. Telecom Egypt said Vodacom had agreed to adhere to the new shareholders agreement.
