Safaricom AGM targets consolidation

Mergers, Acquisitions and Financial Results

Kenyan listed giant mobile communications company Safaricom held it debut annual general meeting (AGM) last week, resolving to consolidate its shares.

The 800,000-plus shareholder company will be looking into the possibility of merging some of its shares in efforts aimed at increasing the share price at Nairobi Stock Exchange (NSE).

The move will also see a reduction in the number of the company’s shares in circulation. Safaricom shares currently valued at $KShs3.75 each have not broken even past the KShs5 they were offered at during a highly publicized IPO last year.

Safaricom Chief Executive Officer, Michael Joseph told shareholders on Wednesday the company was looking at hiring financial advisors to guide the company on how to consolidate the approximately 40 billion shares in circulation.

“We’ve requested the board to allow us go out and get proposals from different advisors as to what is the best way to handle it,”he said.

“We will then come to the board with the proposals but it will take some time and we obviously have to tread very carefully because it could be a costly exercise,” he further added. Joseph said that should they opt for a share consolidation, the formula would be worked out later, after the board had looked at the proposals.

Share consolidation is an exercise whereby the shares of existing shareholders are combined.

For instance, in a 10 to 1 consolidation, 10,000 shares become 1,000 shares.

At the company’s first annual general meeting since its listing at Nairobi Stock Exchange, Mr Joseph explained to about 3,200 shareholders present that the huge number of shares in the market means that the dividend payout has to be split among all shareholders which greatly reduces the amount per share.

The company has a shareholder base of 830,000 who will each get KShs0.10 for each share held.

“With 40 billion shares, how do you pay a reasonable dividend?” he posed, adding that the dividend payout accounted for 40% of their pre-tax profit.

During the meeting, a resolution that will see any shareholder who opts to have their dividend sent via their money transfer service M-Pesa was passed.

However, should the investors wish to withdraw their money from M-Pesa, the commission charged on the service will still apply.

“If the customer is expecting a dividend of KShs100 ($1.3) they will get a KShs100 in their account. It’s only when they want to withdraw that amount as cash that the commissions will apply,” he said adding that the fee is normally shared among them, the agents and the government.

The company had made provisions for 25,000 guests but only about 13% of those showed up in the AGM which sought to break away from the tradition of giving freebies and transport. “We have set a precedent and we hope other companies will follow suit,” he said of the frugal organization of the AGM which enabled them to save about $4.6 million (KShs352 million). Safaricom is currently rated as the most profitable company in Eastern Africa.

East African Business Week