Vodacom’s Safaricom deal struck down by Kenyan high court

Kenya's High Court has overturned Vodacom Group's acquisition of a 15% stake in Safaricom, the country's largest telecommunications company, causing a KES 204.3 billion ($1.58 billion) deal to be jeopardized. This decision comes just three months after the transaction was finalized. The ruling could potentially overturn Kenya's most significant corporate deal and compel the government to return a portion of the shares it had already sold as part of a strategy to raise funds from state assets.

On Tuesday, a panel of three judges found the transaction unconstitutional, citing the government's failure to disclose crucial information to the public, the Cabinet, and parliament, as well as its misrepresentation of the deal's nature. The court declared the partial divestiture a 'camouflage merger or acquisition and takeover of Safaricom PLC' and ordered the 15% stake to be returned to the government for the benefit of Kenyans.

The court also invalidated the method used to approve the sale, as parliamentary hearings did not meet constitutional standards for adequate public participation. Furthermore, the court questioned the government's decision to sell the shares directly to Vodacom instead of through a competitive process to identify a strategic investor.

Concerns were also raised regarding the decision to raise KES 40.2 billion ($311 million) by selling the rights to future dividends from the remaining 20% stake in Safaricom. The court acknowledged the role Safaricom plays in mobile money, government payment systems, election transmissions, and data storage, highlighting that even with regulatory safeguards, there remains a risk of foreign interference in governance, personal security, and data.

The government intends to appeal the decision, but the High Court has not suspended the judgment and has directed the relevant parties to file an application for a stay.