The Saudi Telecom Company’s (STC) Memorandum of Understanding with Vodafone Group for the possible purchase of the latter’s 55% stake in Vodafone Egypt has been extended for 60 days due to the novel coronavirus (COVID-19).
In a statement to the Saudi Stock Exchange, STC said that given the logistical challenges caused by the ongoing pandemic, the two parties involved in the acquisition, STC and Vodafone Group, have agreed to extend the MoU, effective as of Sunday.
The acquisition has been affected by the need for more time to complete the procedures related to the deal, including due diligence.
Sources close to the deal told Daily News Egypt last week that the acquisition MoU could be extended due to the limited time available to complete the due diligence process. The sources noted that the deal is expected to be officially closed before November.
According to the sources, STC will present the due diligence it conducted to its financial advisors. This comes in preparation for the final decision on the value of the mandatory offer submitted to Vodafone Group regarding the 55% acquisition of its Egypt operations.
Daily News Egypt has learned a factor in the extension has been STC’s keenness for more time to study the pattern of spending on telecommunications services by users after the coronavirus crisis.
In the event that STC announces it has made a mandatory purchase offer, Vodafone Group has three options, namely approval, rejection, or entry into a new round of negotiations on the financial value.
At the end of January 2020, STC and Vodafone Group agreed that the latter would sell all its shares in its Egypt operations at a value of approximately $2.4bn.
The ownership structure of Vodafone Egypt is divided into tranches, of which the Vodafone Group owns 55%, which is the target percentage of the Saudi purchase offer. The remaining percentage of ownership is divided between Telecom Egypt (TE) which owns 44.8%, and the remaining 0.2% owned by small shareholders.
The potential deal is subject to the provisions of Chapter 12 of the executive regulations under the Capital Market Law No 95 of 1992 regarding purchase offers with the intention of acquisition.
Egypt’s Financial Regulatory Authority (FRA) had previously reported that the potential STC deal is subject to the provisions of this section of the executive regulations.
TE’s Board of Directors has agreed to appoint an alliance of both EFG Hermes and Citibank and the office of Al-Tamimi & Co as legal consultant, to provide a full study of the options available to the company in the Vodafone acquisition deal.