Vodacom to buy 55% stake in Vodafone Egypt for $2.74 bln

South Africa’s Vodacom Group Ltd said on Wednesday it will acquire a controlling stake in Vodafone Egypt Telecommunications SAE from London-listed parent company Vodafone Group PLC, subject to regulatory and shareholder approvals. Vodacom would buy a 55% stake in the Egyptian arm of Vodafone Group Plc for $2.74 billion, which is around R41.31 billion, in cash and shares.

Vodafone Egypt is 55% held by Vodafone and provides telecommunication services in Egypt, including mobile and fixed voice, SMS and data to around 43 million customers. The remaining 45% is held by Telecom Egypt.

The payment price of USD2.74 billion gives Vodafone Egypt an enterprise value of USD3.15 billion. Vodacom will satisfy 80% of the consideration through the issue of 242.0 million new shares at a price of ZAR135.75 each, which will increase Vodafone’s shareholding in Midrand-based Vodacom from 61% to 65%.

The remaining USD548 million is to be settled through cash. The acquisition is conditional on gaining shareholder approval for the issue of shares, as well as approval from the South African Reserve Bank, Johannesburg Stock Exchange and the National Telecom Regulatory Authority of Egypt.

Vodacom said the acquisition will allow the company to advance its strategic connectivity and ambitions in Africa, and expects the addition of Vodafone Egypt to accelerate its medium-term operating profit growth potential into double digits.

In addition, Vodacom said that after the acquisition, it will change its dividend policy to cover at least 75% of headline earnings, instead of 90% of adjusted headline earnings. Also on Wednesday, Vodacom said it will acquire a 30% interest in a new company known as InfraCo, which will hold the assets of South African fibre network operators Vumatel Pty Ltd and Dark Fibre Africa Pty Ltd, both subsidiaries of Community Investment Ventures Holdings Pty Ltd.

Community Investment Ventures is 57% owned by Stellenbosch-based investment holding company Remgro Ltd, and will hold a 70% stake in InfraCo. The new company will be formed by Community Investment Ventures transferring all of its materials assets into InfraCo, in which Vodacom will subscribe for shares for ZAR6.0 billion in cash.

In addition, Vodacom will contribute its fibre-to-the-home, fibre-to-the-building and business-to-business transmission access fibre network infrastructure into the InfraCo at a value of ZAR4.2 billion.

Vodacom will then directly acquire shares in InfraCo at a price estimated to be ZAR3.0 billion, implying that the total price to be paid for the 30% interest will be ZAR13.2 billion. The acquisition is conditional on gaining regulatory approval from South African competition authorities and the Independent Communications Authority of South Africa.