Vodacom in R41-billion takeover of Vodafone Egypt

Vodacom has announced it will acquire a controlling stake in Vodafone Egypt, subject to regulatory and shareholder approvals.

The Vodacom Group will fund the acquisition of a 55% stake in Vodafone Egypt by issuing 242 million new ordinary shares at R135.75 per share and R8.2 billion in cash. That values the proposed transaction at around R41 billion.

Vodacom Group CEO Shameel Joosub said that acquiring a majority stake in Vodafone Egypt would advance Vodacom’s strategic connectivity and financial services ambitions while increasing its total population coverage on the continent to over half a billion people and more than 40% of Africa’s GDP.

“Vodafone Egypt is ideally positioned to capture growth in a burgeoning ICT market, which means the proposed acquisition provides our shareholders with an exciting revenue and profitability diversification opportunity and the potential to accelerate the Group’s medium-term operating profit growth potential into double digits,” Joosub said.

“We intend to provide an update on our medium-term targets at our full-year results, which will be reported in May 2022,” he added.

Vodacom said that Egypt’s appeal as an investment destination was supported by its “economic growth outlook, large, young and growing population and structural reform agenda”.

Vodafone Egypt is the country’s largest mobile network operator with a 43% revenue market share and 43 million consumers and enterprise customers.

Joosub likened the latest transaction to Vodacom’s purchase of a strategic stake in Safaricom in 2017, which proved to be value accretive.

“We said at the time that we had negotiated an attractive price for Safaricom, and we believe this to be the case with Vodafone Egypt.”

Vodacom added that Vodafone Egypt had a “proven track record” of consistently delivering strong revenue growth, while its future growth potential is underpinned by a broad range of fundamental sector and company-specific drivers.

In addition, it generated attractive margins and strong free cash flow.

Vodafone Egypt is also the country’s largest mobile wallet provider through Vodafone Cash.

“According to the national telecom regulatory authority, Vodafone Cash had almost 90% of mobile wallet transactions as at August 2021,” Vodacom said.

“With more than 80% 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 largely untapped market.”

PWC  has been appointed to provide a fairness opinion on the proposed transaction.

That will be included in a circular to be distributed to shareholders ahead of a General Meeting in January 2022, at which minority shareholders will vote on the matter.

“Once all of the conditions precedent are met pertaining to the proposed transaction, the acquisition is expected to conclude before 31 March 2022,” Vodacom said.

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