Kenyan banks have lobbied Parliament to have the government sell 300.4 million shares of Safaricom to the public and dispose of the other 5.7 billion shares to South Africa’s Vodacom Group Limited, arguing that this will deepen the capital markets and broaden ownership of the telco.
The Kenya Bankers Association (KBA) on Thursday made submissions to the National Assembly’s Departmental Committee on Finance and National Planning as part of public hearings after the National Treasury signed a deal to sell six billion shares equivalent to a 15 percent stake in Safaricom to Vodacom at a price of Sh34 per share or a total of Sh204.3 billion.
Bankers say they support the transaction but want it amended so that a 0.75 percent stake can be sold to the general public.
Only 25 percent of Safaricom’s shares are currently available for trading on the Nairobi Securities Exchange, with the majority 75 percent held by the government, Vodacom and its UK-based parent firm Vodafone Group.
“Although banks support the divestiture, the sector recommends that five percent of the shares under divestiture be reserved to the public to broaden public ownership and participation in this national key asset,” KBA said through its chief executive Raimond Molenje.
“By placing more Safaricom shares in free float and aligning a major portion with a strategic investor like Vodacom/Vodafone, the NSE stands to benefit from higher liquidity and deeper market participation.”
Should the proposal be accepted, the 300.4 million shares could be offered to the general public for Sh10.2 billion based on the deal price of Sh34 per share which is a premium to the telco’s closing price of Sh29.7 on Thursday.
Such an offer is likely to appeal to institutional investors –who will get a chance to buy many shares in one transaction— as opposed to retail investors who can build their stakes at cheaper prices in the open market.
The agreement between Vodacom and the National Treasury is not cast in stone, meaning that the parties could make changes if they wish to without penalties.
Changes to large-scale negotiated transactions of this nature are, however, rare.
“No irrevocable undertakings have been given and no options to acquire have been given or received from any existing shareholder of Safaricom and no agreements, arrangements or undertakings exist or are proposed between Vodafone Kenya [Vodacom’s investment vehicle] or any related company or person associated or acting in concert with it and any existing shareholders of Safaricom,” Vodacom said in a notice.
The South African multinational added that it has, however, received a firm sale commitment from Vodafone from which it is also buying a five percent stake in Safaricom at the same price of Sh34 per share.
As presently structured, the deal will see Vodacom take a controlling 55 percent stake in Safaricom once it buys a total of eight billion shares from the government and Vodafone Group.
The Midrand-based multinational currently owns a 35 percent interest in the telco.
The government will receive Sh204.3 billion for its shares and a separate Sh40.2 billion representing an upfront payment of dividends that will accrue on the State’s residual 20 percent stake in Safaricom. This will bring its total payout to Sh244.5 billion. Vodafone, which is the ultimate parent firm of both Safaricom and Vodacom, will receive Sh68.1 billion for its stake.
