Vodacom, operating through its subsidiary Vodafone Kenya, has announced a significant proposed transaction to acquire a majority stake in Safaricom, Kenya's largest mobile provider. The deal involves the acquisition of an additional 15% of the issued shares in Safaricom from the Government of Kenya (GOK), amounting to 6,009,814,200 ordinary shares. This acquisition is valued at KES 204.3 billion, approximately USD 1.6 billion, with a price of KES 34.00 per share.

Upon completion of this transaction, Vodacom's stake in Safaricom will increase from its current 40% to 55%, thereby giving it majority control. The post-deal shareholding structure will see the Kenyan government retaining approximately 20% of Safaricom's shares, while general public investors will hold around 25%. Safaricom itself is a dominant force in the Kenyan market, serving approximately two-thirds of the country’s mobile subscribers and boasting a valuation of about $8.9 billion (KSh 1.19 trillion), making it one of East Africa's most valuable companies.

As an integral part of this strategic maneuver, Vodacom will also acquire Vodafone International Holdings' 12.5% stake in Vodafone Kenya. This will effectively make Vodacom the sole owner of Vodafone Kenya. Both the GOK Share Acquisition and the Vodafone Kenya Acquisition are inter-conditional shareholder-to-shareholder transactions, with expectations for simultaneous completion, as confirmed in Safaricom's statement.

The Government of Kenya's decision to divest 15% of its Safaricom shares is a critical move aimed at bolstering national revenue. This action is intended to address the country's growing debt burden and reduce budget deficits. The significant funds generated from this sale are anticipated to provide a substantial financial injection to improve Kenya's fiscal health.

While this acquisition grants Vodacom significant control, it also raises questions regarding potential takeover regulations. Specifically, regulations 3(1) and 4 of Kenya’s Takeover Regulations could be triggered. However, Vodafone Kenya has formally stated its intention not to launch a complete takeover offer for Safaricom. Instead, it will apply to the Capital Markets Authority of Kenya (CMA) for an exemption under regulation 5(1) of the Take-over Regulations. This exemption would allow Vodacom to maintain its increased control without being obligated to make an offer to acquire the remaining 45% from other stakeholders.

In a further financial arrangement, Vodacom will make an upfront payment of KSh 40.2 billion to the GOK. This payment is in exchange for future dividends that the GOK would have received from its retained 20% stake in Safaricom. The successful completion of this comprehensive proposed transaction is contingent upon obtaining all necessary approvals from both the CMA and the Kenyan Cabinet. It is important to note that this is not Vodacom’s first stake increase in Safaricom; it previously raised its holding in 2017 through a share swap with its UK parent company, Vodafone.