15 May 2017

East Africa: Vodafone Transfers a 33 Percent Interest in Safaricom to Vodacom

Vodafone Group has announced that its wholly-owned subsidiary, Vodafone International Holdings, has agreed to transfer part of its indirect shareholding in Safaricom Limited to Vodacom Group Limited, its sub-Saharan African subsidiary.

According to a press statement by Vodafone, based on the agreed terms of the transaction, Vodafone will be exchanging a 35% indirect interest in Safaricom for 226.8 million new ordinary Vodacom shares.

The transaction, which has a value of €2,361 million based on Vodacom's closing share price on Friday 12 May 2017, will increase Vodafone's ownership in Vodacom from 65% to 70%. Vodafone will continue to hold a 5% indirect interest in Safaricom following the transfer, in addition to the indirect interest held through Vodacom.

As part of the transaction, Vodafone Group has given appropriate assurances to the Government of Kenya to ensure the ongoing success of the long standing partnership between Safaricom, the wider Vodafone Group and the Government of Kenya.

The CEO of Safaricom, Bob Collymore, said in a press statement, "The agreement Vodafone Group has reached with the Government of Kenya will ensure Safaricom continues to have strong Kenyan representation at Board and management levels, and promotes the continued successful expansion of the company as well as the opportunity to drive M-PESA to other markets in the continent."

The transaction is expected to generate clear benefits for Safaricom, Vodacom and Vodafone Group: Vodafone Group streamlines and simplifies the management of its sub-Saharan African holdings, strengthens alignment and cooperation between Safaricom and Vodacom and provides greater scope to share talent and expertise across the region as well as internationally; and Vodacom gains exposure to the attractive Kenyan market and one of the most successful and innovative telecoms companies in Africa, further enhancing its investment case and strategic position.

Vodafone currently holds a 40% indirect interest in Safaricom through a wholly-owned subsidiary, Vodafone Kenya Ltd ("VKL"). Vodacom has agreed to acquire an 87.5% shareholding in VKL, representing a 35% indirect interest in Safaricom. Vodafone will retain the remaining 12.5% shareholding in VKL, representing a 5% indirect interest in Safaricom.

Vodacom has agreed to issue 226.8 million new ordinary Vodacom shares to Vodafone, which values the effective 35% indirect interest in Safaricom at €2,361 million based on Vodacom's closing share price on Friday 12 May. The implied exchange ratio of 1.62 new Vodacom shares for every 100 Safaricom shares compares to an implied exchange ratio of 1.56 based on the 90 day VWAP, 1.63 based on the 180 day VWAP and 1.72 based on the closing prices on Friday 12 May.

Following the transaction, Vodafone Group will continue to report its direct and indirect holdings in Safaricom under the equity method. The transaction is not expected to have a material impact on Vodafone Group's free cash flow or its earnings.

After the transaction completes, Vodacom is expected to have a free float of approximately 18%, which means that it will not meet the minimum free float requirement of 20% for its listing on the Johannesburg Stock Exchange ("JSE"). Consequently, Vodacom has secured a two year exemption from the free float requirement from the JSE. Vodafone has committed to Vodacom that, if required, it will sell down a portion of its shareholding in Vodacom before the exemption expires.

Completion of the transaction is subject to a number of conditions, including approvals from Vodacom minority shareholders, approval from the Financial Surveillance Department of the South African Reserve Bank and confirmation from the Kenya Capital Markets Authority that the Transaction does not trigger an obligation for Vodacom to make a mandatory bid for Safaricom.

A committee of Vodacom's independent non-executive directors has unanimously approved the transaction. Vodacom has appointed an independent expert, Deloitte & Touche to provide a fairness opinion on the proposed transaction which will be included in the circular to be distributed to Vodacom shareholders on or about 5 July 2017 with the general meeting to approve the reorganisation expected to take place on or about 15 August 2017.

The transaction is expected to close in the third quarter of the 2017 calendar year.

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