South Africa’s Vodacom has completed the purchase of an additional 15 percent stake in Safaricom ahead of the closure of the telco’s shareholder registry for dividend payment on August 4, denying the Treasury Sh16.1 billion in additional pay.
On Tuesday, Vodacom announced it had closed the share purchase, three days after the Court of Appeal lifted orders that blocked the State from transferring the stake to the South African telecoms giant.
The transaction was executed on the Nairobi Securities Exchange (NSE) on Tuesday as a block trade, marking the largest single transaction ever conducted on the bourse.
Safaricom PLC headquarters in Westlands, Nairobi.
Photo credit: File | Nation Media Group
Had the sale of the stake been delayed beyond August 4, when Safaricom closes its books for the payment of a final Sh1.15 dividend per share, the Treasury would have earned Sh16.1 billion from the 15 percent stake.
Parties to the transaction had expected the Sh244.5 billion Vodacom deal to be concluded by March 31, locking out Kenya from earning the final dividend from Safaricom’s full-year profits for the period that ended in March.
But the court battle delayed the conclusion of the deal, raising the prospect that the State could receive dividends from the 15 percent stake.
The transaction was frozen when the petitioners, Tony Gachoka and Fredrick Ogola, sued several State agencies, Safaricom Plc and Vodacom Group over the legality of the government’s plan to reduce its stake in the telecoms firm.
The planned sale to Vodacom sharply divided opinion in Kenya.
Some reckoned the deal was good for Kenya, while others were sceptical about the value for the country, arguing that Vodacom remains the winner after getting full control of a cash-generative subsidiary.
Safaricom’s market price
A joint parliamentary committee approved the sale, paving the way for the conclusion of the deal.
The State is set to raise Sh244.5 billion for the exchequer, including Sh204.3 billion for six billion shares sold for Sh34 per share, and an advanced dividend of Sh40.2 billion.
The transfer of the shares to Vodacom boosted the NSE’s daily turnover to a record Sh208.15 billion, from Sh4.7 billion the previous day, and raised the number of shares traded on the day to 6.06 billion from 68.7 million on Monday.
The transaction did not affect Safaricom’s market price since the sale price of Sh34 per share was directly negotiated by Vodacom and the Treasury, with the NSE only providing a platform for settlement of the shares.
Previously, such transactions, which are normally carried out off-market, were not recorded as part of a day’s turnover, denying investors visibility over potentially significant share transfers by large shareholders.
A Vodacom shop in Johannesburg, South Africa.
Photo credit: Pool
The NSE set up the block trade board in 2023 on the main market segment to handle the sale of shares whose value exceeds Sh3 billion and constitutes five percent or more of an issuer’s total issued shares.
“This is a landmark moment for Vodacom, for Safaricom, and for the communities we serve across East Africa,” Vodacom Group CEO Shameel Joosub said yesterday in a statement.
“Acquiring majority ownership in Safaricom strengthens our position as a market leader, while at the same time unlocking new opportunities to drive digital and financial inclusion at scale in Kenya and Ethiopia.”
Facing high public debt, limited room to raise taxes, and annual debt repayments that absorb 40 percent of government revenues, President William Ruto’s administration is turning to asset sales to bolster its finances.
Attaining majority control
The government’s stake in Safaricom will drop from 35 percent to 20 percent.
Concurrently with the purchase of the 15 percent stake from the government, Vodacom is also buying a five percent stake in Safaricom that is held by parent firm, Vodafone Group, at the same price of Sh34 per share.
Once the twin deals are sealed, Vodacom will raise its ownership in the telco to 55 percent, attaining majority control.
Proceeds from the 15 percent State stake sale in Safaricom are expected to form seed capital for the recently established National Infrastructure Fund.
The seed capital for the fund currently has proceeds from the initial public offering of the Kenya Pipeline Company, which was concluded earlier in March.
The NIF is expected to serve as the primary vehicle for financing large-scale infrastructure expansion, including roads, railways, energy and water systems.
