Vodafone Group to transfer stake in Egyptian unit to Vodacom

10 Nov 2021

UK-based Vodafone Group has inked an agreement to transfer its 55% shareholding in Vodafone Egypt to its sub-Saharan African subsidiary, Vodacom Group. In a press release announcing the development, Vodafone stated the transfer would simplify the management of its African holdings and ‘further strengthen the delivery of connectivity and financial services in Africa’.

In terms of details of the transaction, Vodafone Group said this values its 55% stake in Vodafone Egypt at EUR2.722 billion (USD3.15 billion) 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 the Group’s 55% share of the net debt in the subsidiary as at 30 September 2021 the total equity consideration is EUR2.365 billion (the ‘Purchase Consideration’), with approximately 80% of that figure to be settled by the issuing of 242 million new ordinary Vodacom shares to Vodafone at an issue price of ZAR135.75 (USD9.05) per share. As a result, Vodafone Group’s ownership in Vodacom Group will increase from 60.5% to 65.1% upon completion of the deal. Meanwhile, the remaining 20% of the Purchase Consideration (EUR473 million) will be settled in cash.

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

For its part, Vodacom Group has appointed an independent expert, PricewaterhouseCoopers Inc., to provide a fairness opinion on the proposed transaction, which will now require approval by ordinary resolution from the minority shareholders representing 39.5% of the Vodacom shares; Vodafone Group has confirmed that it will not vote on the matter, as it represents a related party transaction. Vodacom has, however, already 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.

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 (NTRA) of Egypt. Vodacom Group has committed to Vodafone Group that it will sign a deed of adherence to the shareholders’ agreement with Telecom Egypt. The transaction is expected to close before 31 March 2022.

Egypt, South Africa, Vodacom Group, Vodafone Egypt, Vodafone Group