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Vodacom completes acquisition of 55% stake in Vodafone Egypt

Vodafone Group Plc announces that it has agreed to transfer its 55% shareholding in Vodafone Egypt to Vodacom Group Limited, its sub-Saharan African subsidiary. This transfer simplifies the management of Vodafone’s African holdings and further strengthens the delivery of connectivity and financial services in Africa.

Transaction rationale
The transaction is expected to generate clear benefits for Vodafone, Vodacom and Vodafone Egypt:

  • Vodafone simplifies the management of its African holdings;
  • Vodacom gains exposure to another leading business in an attractive market, diversifying its portfolio and accelerating its growth profile; and
  • Vodafone Egypt will benefit from closer co-operation with Vodacom, enabling it to accelerate growth in financial services and IoT.

Transaction details
The transaction values Vodafone’s 55% shareholding in Vodafone Egypt at €2,722 million on a debt free, cash free basis, implying a multiple for the last twelve month period ended 30 September 2021 of 7.3x Adjusted EBITDAaL and 12.2x Adjusted OpFCF. Based on Vodafone’s 55% share of the net debt in Vodafone Egypt as at 30 September 2021 the total equity consideration is €2,365 million (the “Purchase Consideration”). Approximately 80% of the Purchase Consideration (€1,892 million) will be settled by the issue of 242 million new ordinary Vodacom shares to Vodafone at an issue price of ZAR 135.75 per share. As a result, Vodafone’s ownership in Vodacom will increase from 60.5% to 65.1%.

The remaining 20% of the Purchase Consideration (€473 million) will be settled in cash.

Under the terms of the sale and purchase agreement, the cash element of the Purchase Consideration will be adjusted for any movement in the net debt and agreed working capital of Vodafone Egypt between signing and closing. As such, Vodafone will be entitled to its 55% share of the cash generated by Vodafone Egypt between signing and closing.

The Johannesburg Stock Exchange (“JSE”) has taken note that Vodacom’s JSE defined free float will be below 20% as a result of Vodafone’s increased ownership. Given the scale of Vodacom’s current liquidity on the JSE, the JSE has not asked for any remedial steps to be taken. Vodafone confirms that is has no current intention to dispose of any of its shares in the market to increase Vodacom’s free float.

Conditions to completion and indicative timetable
A committee of Vodacom’s independent non-executive directors has unanimously approved the transaction. Vodacom has appointed an independent expert, PricewaterhouseCoopers Inc., to provide a fairness opinion on the proposed transaction which will be included in the circular. The circular and notice of a general meeting will be posted to Vodacom Group shareholders in due course. Given the transaction represents a related party transaction per the listing requirements of the JSE, Vodafone will not vote on the transaction and the transaction will require approval by ordinary resolution from the minority shareholders representing 39.5% of the Vodacom shares.

Vodacom has received an irrevocable undertaking to vote in favour of the transaction from YeboYethu Investment Company (RF) Proprietary Limited which owns 6.2% of the Vodacom shares in issue and 15.8% of the Vodacom shares in issue outside those held by Vodafone. Vodacom has also received an in-principle letter of support to vote in favour of the proposed transaction from Public Investment Corporation which owns 14.3% of the Vodacom shares in issue and 36.1% of the Vodacom shares in issue outside those held by Vodafone as at the date of their letter. The Public Investment Corporation’s in-principle support is subject to it conducting an assessment and evaluation process upon receipt of the circular.

The sale of Vodafone’s shareholding in Vodafone Egypt constitutes a Class 2 transaction for the purposes of the UK Financial Conduct Authority’s Listing Rules, and, as such does not require Vodafone shareholders’ approval.

Completion of the transaction is subject to a number of additional conditions, including but not limited to: approval from the Financial Surveillance Department of the South African Reserve Bank and approval from the National Telecom Regulatory Authority of Egypt. Vodacom has committed to Vodafone that they will sign a deed of adherence to the shareholders’ agreement with Telecom Egypt. The transaction is expected to close before 31 March 2022.

CT Bureau

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