Why UK private equity fund pulled out of Telkom Kenya for Sh129
A subscriber holds a 4G Telkom SIM card in Nyeri town on September 1, 2020.
The government’s decision to hive off property valued at Sh10 billion from Telkom Kenya’s balance sheet without the knowledge of Helios Investment Partners is the straw that broke the camel’s back and prompted the private equity fund to initiate its exit from the struggling telecommunications giant in 2021.
Documents seen by the Daily Nation reveal that this was one of the two major developments that prompted the private equity fund to exercise its put option which refers to the right given to a shareholder to require another shareholder to buy them out.
“The government of Kenya proceeded to unlawfully expropriate prime property of Telkom Kenya Limited situated along Ngong’ Road Nairobi measuring approximately 79 acres valued at over Sh10 billion without Telkom’s or Jamhuri Holding Ltd.’s consent and without any compensation being committed or paid”, the letter from Paul Cunningham dated March 20th, 2023 addressed to the Office of the Clerk of the National Assembly reads.
Paul Cunningham is a Director at Jamhuri Holding Ltd which is the special purpose vehicle that was set up by Helios for its investment in Telkom Kenya Ltd in June 2016. It has also emerged that the failure to consummate the joint venture between Telkom Kenya and Airtel Kenya in 2019 was also another major factor prompting the exit of Helios.
Documents show that it had been expected that the joint venture arrangement was expected to scale down the need for further capital injection by Jamhuri Holding Ltd into Telkom Kenya.
“There were considerable delays in securing regulatory approval for the merger transaction, in part attributable to protracted investigations launched by the Ethics and Anticorruption Commission on Telkom Kenya and its officials on various matters on various matters which were ultimately dropped with no adverse findings”, Cunningham’s letter states.
According to the letter, Telkom Kenya Ltd, the government of Kenya, and Jamhuri Holding Ltd lost $ 200 million (Sh26.11billion) due to the failed joint venture with Airtel Kenya owing to the resources it had deployed in preparation for the aborted joint venture.
Cunningham states that the government of Kenya acquired the 60.0 per cent stake in Telkom Kenya for consideration of $1 translating to a pay-out of Sh119.45 given the average exchange rate of August 2022 when the transaction took place.
This is besides the Sh6.1 billion that was paid due to the government taking up $ 51,186,058(Sh6.68billion) worth of shareholder loans held by which is a special purpose vehicle set up by private equity fund, Helios, to invest in Telkom Kenya in June 2016.
