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Tuesday, 22 December 2020

Egypt’s largest-ever M&A goes kaput

Big Red isn’t going to rebadge as STC: Vodafone Group has terminated discussions with the Saudi Telecom Company (STC) over the proposed sale of its 55% stake in Vodafone Egypt, the UK company said in a statement on Monday that provided no reason for the end to talks.

The collapse of talks comes just a few days after Vodafone Group CEO Nick Read met with President Abdel Fattah El Sisi in Cairo. Read told the president the company intends to maintain a presence in Egypt and increase investment in the country, including installing 5G towers in the new administrative capital and using Egypt as a tech hub for Africa.

“We believe that the Egyptian government is committed to an optimal framework for the telecoms sector, which will enable Vodafone Egypt to deliver on the country’s vision of digitization and financial inclusion and create a technology hub to support our growth in the African region,” Read said in the statement yesterday.

Vodafone is now planning to invest EGP 5 bn in network upgrades, in part to support the rollout of new spectrum, our friend Noha Saad, head of external communications at Vodafone Egypt, told Kelma Akhira’s Lamees El Hadidi. The meeting’s “positive outcome” also included discussion of key issues including the operator’s need for more spectrum, Saad said (watch, runtime: 13:04).

Talks appeared to be moving ahead in September after a series of delays: STC and Vodafone had vowed to continue the acquisition talks despite a deadline set by an MoU signed in January expiring in September. The Saudi firm made a USD 2.39 bn non-binding offer for a majority stake in January, valuing Vodafone’s Egyptian operations at USD 4.4 bn. STC tried to trim its offer following the pandemic and the crash in oil prices which Vodafone was reportedly close to agreeing to, before STC announced in September that the talks had fallen through “due to misalignment with relevant parties.”

The talks had been postponed at least twice before: a 90-day extension to the MoU signed in January was agreed in April, and a 60-day postponement was announced in mid-July because of “logistical challenges” stemming from the pandemic.

Vodafone was a willing seller as the company exited non-core markets to focus on Europe and Africa starting in 2018 when Read took over. The company has sold its operations in New Zealand and Malta in the past 18 months and plans to IPO its towers business in the new year.

There remains uncertainty what state-owned telecoms giant Telecom Egypt will do. TE holds 44.7% of Vodafone Egypt and had the right of first refusal to make a counter-offer to STC’s bid. While some had suggested TE lacked the firepower to make an offer, some analysts have suggested that the parent company of fourth mobile operator We was in talks with as many as five banks that had expressed interest in backing the transaction.

Also unclear is what the Egyptian Competition Authority might say about any future bid by TE for Vodafone Egypt. Although the Egyptian Competition Authority doesn’t yet have the power to block an acquisition, TE’s takeover of Vodafone Egypt would raise questions about its effects on market competition. Already the sole owner of We, the acquisition of Vodafone would give TE control of two of the four mobile network operators active in Egypt.

Most likely scenario: TE is happy to remain a partner to Vodafone Plc and collect a steady stream of dividend income.

OTHER M&A NEWS- Odin bails on El Nasr Civil Works: Odin Investments is no longer interested in acquiring Madinet Nasr Housing and Development’s (MNHD) El Nasr Civil Works after the real estate developer last week rejected its offer, the Financial Regulatory Authority said (pdf) Sunday. The consortium launched a mandatory tender offer to acquire 90% of El Nasr last week for EGP 11 per share, which MNHD tossed out claiming the valuation didn’t reflect the company’s earnings and financial position.

ALSO- Kayan Sustainable Development is looking to buy 90% of ANFI, the Alexandria National Company for Financial Investment. Kayan wants to acquire 90% of ANFI from Abu Dhabi Islamic Bank (ADIB) subsidiary, the bank said yesterday in a regulatory filing (pdf).

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