Kenya’s government rescinded an agreement to buy a 60% stake in Telkom Kenya Ltd. from a unit of Helios Investment Partners and demanded a refund, after lawmakers questioned the deal struck last year.
(Bloomberg) — Kenya’s government rescinded an agreement to buy a 60% stake in Telkom Kenya Ltd. from a unit of Helios Investment Partners and demanded a refund, after lawmakers questioned the deal struck last year.
The state wants a refund from Jamhuri Holdings Ltd. because of “governance challenges” surrounding the transaction, the cabinet said in a statement on Tuesday, without mentioning the amount. In February, lawmakers rejected a $51.2 million payment to Helios.
The deal was signed in the final days of former President Uhuru Kenyatta’s administration. Jamhuri is wholly owned by Helios Investors III, L.P., a fund advised by Helios Investment Partners, which didn’t respond to an emailed request for comment.
The fallout could be messy, said Deepak Dave, an analyst at Toronto-based Riverside Advisory.
“Helios is a firm with sharp elbows, and are unlikely to just roll over if they see themselves as being on firm legal ground,” he said by email. “It will be instructive for the entire financial sector in Africa to see what Kenya’s Plan B is should Helios refuse to pay.”
The decision to cancel the deal comes as Kenya’s government faces a cash crunch and investors worry about the state’s ability to meet its external funding needs. The East African nation is contending with skyrocketing energy and food import bills, low foreign-exchange reserves and has $2 billion of eurobonds maturing in June.
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Helios’s sale of the 60% stake in Telkom Kenya was announced by the government in October, two months after President William Ruto’s election. The government’s purchase of the shareholding made the firm wholly state-owned — it previously held 40% of the shares.
Terms of the deal announced earlier this year showed that the National Treasury paid $1 for the stake and acquired two loans totaling $291.1 million that Helios advanced to Telkom. Chairman Eddy Njoroge told lawmakers in March that the board wasn’t privy to the negotiations that led to the government buying the stake.
Jamhuri said in a letter to lawmakers that the decision to sell the stake was made after the Kenyan government unlawfully expropriated Telkom assets without consulting Helios, Business Daily reported in March. A failed attempt to combine Telkom’s operations with Airtel Kenya Ltd. to form a competitor to industry leader Safaricom Ltd. also prompted the exit, it said.
The cabinet ordered Telkom to seek a new strategic investor, according to the statement.
“Cabinet’s intervention will enhance the operational capacity of Telkom Kenya and make it a competitive player in the telecommunications market,” it said.
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