Vodacom has announced that it will appeal a Kenyan High Court decision that nullified its $1.9 billion purchase of a 15% stake in Safaricom, setting the stage for a fresh legal battle over the high-profile transaction.

On Wednesday morning, Vodacom told Bloomberg that it will challenge the ruling at the Court of Appeal.

"As interim steps, Vodacom will lodge an appeal against today's decision with the Court of Appeal and will also apply for a stay pending the determination of the appeal," the company said.

Vodacom added that it will also seek a pause of the ruling while the matter is heard at the Court of Appeal. Should the appeal prove unsuccessful, the Kenyan government would have to refund the $1.9 billion it has already received for the stake sale. That would deal a major blow to a government counting on the funds to finance public infrastructure and pay off debts.

Tuesday's ruling, delivered by Judges Francis Gikonyo, Roselyne Aburili and Tabitha Ouya, ordered that the 15% stake in Safaricom Plc be returned to the government, finding that the sale violated public-finance management laws.

"Critical transactional documents such as the share-purchase agreement and a dividend rights purchase pact weren't disclosed for public scrutiny, while the state didn't explain in court why it settled on Vodacom as a buyer without a competitive selection process," the judges said.

According to the court, "the divestiture was undertaken in contravention of the Constitution and the law and was therefore 'invalid, null and void'," with the judges adding that "the 15% shares are hereby restored to the Government of Kenya."

The decision renders the earlier sale of the government's 15% Safaricom stake to Vodacom illegal. The High Court held that the divestiture was carried out against the Constitution and without public participation, since the 15% share belonged to the people of Kenya. Unless the court grants the requested stay, the order unwinds the deal terms under which the state's holding had been reduced to 20%.

Also read: Safaricom shareholders to vote on Vodacom's right to appoint CEO after takeover. The litigation lands as Safaricom shareholders are separately set to vote on Vodacom's right to appoint the operator's chief executive after the takeover, tying the court battle directly to the governance changes the transaction was meant to unlock.

Under the December agreement, Vodacom was to raise its stake in Safaricom from 40% to 55% by acquiring 15% of the Kenyan government's shares in the operator, reducing the state's holding to 20%. The deal also required Vodacom to buy Vodafone International Holdings' remaining 12.5% stake in Vodafone Kenya, making it the unit's sole owner. The move to 55% would give Vodacom majority ownership of Safaricom — a position that now hinges on the outcome of the appeal.

The sale raised about 204.3 billion shillings ($1.6 billion), along with an additional 40.2 billion shillings ($300 million) from the securitisation of future dividends — a combined roughly 244.5 billion shillings (about $1.9 billion) that would be subject to refund if the nullification stands.

The stake sale was pivotal for the government, standing at the center of how President William Ruto's administration plans to fund a significant portion of public spending. With limited room to borrow more or raise taxes further, Kenya has turned to selling stakes in state-owned assets, including Safaricom and Kenya Pipeline Company, to finance infrastructure projects under Ruto's $39 billion development plan. The program envisions building railways, airports, roads, power lines and dams, expanding irrigation, and cutting transportation costs.

The transaction had already survived one legal challenge before Tuesday's ruling. The High Court initially blocked the deal, but the Court of Appeal overturned that decision, holding that the public interest demanded the sale be made without any delay. The dispute now heads back to that same court, which must decide whether to grant Vod's requested stay and, ultimately, whether to uphold or set aside the nullification. Until then, ownership of the 15% stake — and the roughly $1.9 billion already paid for it — remains unresolved.

Source: TechNext24