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Wednesday, 5 February 2020

STC might be required to submit a mandatory offer for 100% of Vodafone Egypt

M&A WATCH- STC could be required to submit a mandatory offer for 100% of Vodafone: Saudi Telecom Company (STC) is required by law to submit a mandatory tender offer (MTO) for the 44.8% stake in Vodafone Egypt owned by Telecom Egypt (TE) and the 0.2% held by minority shareholders if it closes its bid to acquire the other 55% from Vodafone Group, Al Wafd reports, quoting unnamed sources from the Financial Regulatory Authority (FRA).

How would this happen? Article 325 of the Capital Markets Act’s executive regulations states that an MTO must be presented by any party acquiring a majority stake in a company that has sold its shares through a public offering in a primary market at any point in time, even if the company is no longer listed at the time of acquisition. This applies to Vodafone Egypt, which was listed on the EGX until 2007.

If TE is looking to offload its stake, this is its golden ticket: According to analysts quoted by several news outlets this week, TE is more likely to sell its stake than it is to call on a right of first refusal to pre-empt the STC bid. Offloading the stake would help the state-owned company finance its operations, but the question is whether STC would buy it.

On the other hand, Vodafone Group will likely pay a capital gains tax on the sale in the UK, not Egypt, the local press reports, citing sources close to the bid. The transaction would still be subject to a 0.3% stamp tax in Egypt on the buyer and an equal percentage on the seller that calculated on the total USD 2.4 bn value, former vice minister of finance for tax policy Amr El Monayer said earlier this week.

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