Vodafone Group has announced its agreement with Zegona Communications to sell 100% of Vodafone Holdings Europe, specifically Vodafone Spain, for an enterprise value of €5.0 billion. The deal includes €4.1 billion in cash and up to €0.9 billion in Redeemable Preference Shares (RPS), with the transaction expected to complete in the first half of 2024. The sale aims to refocus Vodafone’s resources towards markets with sustainable structures and sufficient local scale.
- Vodafone has entered into binding agreements with Zegona for the sale of 100% of Vodafone Spain for at least €4.1 billion in cash and up to €0.9 billion in Redeemable Preference Shares.
- Vodafone will continue to provide certain services to Vodafone Spain for an annual service charge of around €110 million.
- The transaction is expected to be completed in the first half of 2024, subject to approvals and regulatory clearances.
Vodafone and Zegona Shake Hands on a Major Deal
In a surprising turn of events, Vodafone Group Plc has confirmed its decision to sell 100% of Vodafone Holdings Europe, S.L.U., better known as Vodafone Spain, to Zegona Communications plc. This significant transaction will see Vodafone receive a combination of cash and Redeemable Preference Shares (RPS) totalling €5 billion.
Transaction Breakdown
On finalisation, Vodafone stands to gain a minimum of €4.1 billion in cash and up to €0.9 billion in RPS. These shares are redeemable, with the redemption amount including the subscription price and accrued preferential dividend, six years post-closure.
In addition, an agreement has been established for Vodafone to provide certain services to Vodafone Spain, garnering an annual service charge of approximately €110 million. The total enterprise value of the deal, therefore, stands at €5.0 billion.
Vodafone’s Perspective
Margherita Della Valle, Chief Executive of Vodafone, shared her thoughts on the deal:
“The sale of Vodafone Spain is a key step in right-sizing our portfolio for growth and will enable us to focus our resources in markets with sustainable structures and sufficient local scale. My priority is to create value through growth and improved returns. Following the recently announced transaction in the UK, Spain is the second of our larger markets in Europe where we are taking action to improve the Group’s competitiveness and growth prospects.”
The Nitty-Gritty of the Deal
To facilitate the cash consideration, Zegona has arranged for fully committed debt facilities of up to €4.2 billion. It also plans to raise equity through an institutional placing of new Zegona shares before the completion of the transaction, subject to market conditions.
Further, any equity raise by Zegona exceeding €400 million prior to completion will result in a 50% surplus paid to Vodafone in cash. Correspondingly, the number of RPS Vodafone receives will be reduced.
The RPS will be issued by a newly formed entity, EJLSHM Funding Limited (FinCo). This company’s sole purpose will be to redeem the RPS, planned for 6 years after completion or earlier following a significant liquidity event or Zegona’s exit that releases funds to shareholders.
Brand Licence Agreement
Post-completion, Vodafone and Zegona will enter into a brand licence agreement, permitting the use of the Vodafone brand in Spain for up to 10 years. Furthermore, both entities will arrange other transitional and long-term services, including access to procurement, IoT, roaming, and carrier services.
Final Thoughts
This major move by Vodafone not only marks an evolution in its portfolio but also signifies a shift in the telecom landscape of Spain. While the company assures its priority remains growth and improved returns, the departure from one of Europe’s larger markets is indeed a significant decision. As the industry watches with bated breath, the impact of this transaction on Vodafone’s overall performance and the telecom sector in Spain remains to be seen.
FAQ
Q: What is Vodafone announcing in relation to Vodafone Spain?
A: Vodafone is announcing that it has entered into binding agreements with Zegona Communications plc for the sale of 100% of Vodafone Spain.
Q: What will be Vodafone’s consideration for the sale?
A: On completion, Vodafone’s consideration will comprise at least €4.1 billion in cash and up to €0.9 billion in the form of Redeemable Preference Shares (RPS).
Q: What services will Vodafone provide to Vodafone Spain after the sale?
A: Vodafone and Zegona have entered into an agreement whereby Vodafone will provide certain services to Vodafone Spain for a total annual service charge of approximately €110 million.
Q: What is the enterprise value of the transaction?
A: The enterprise value of the transaction is €5.0 billion, which is equivalent to a multiple of 5.3x Adjusted EBITDAaL and 12.7x OpFCF for the 12-month period ended 31 March 2023.
Q: Why is Vodafone selling Vodafone Spain?
A: Vodafone is selling Vodafone Spain as part of its strategy to right-size its portfolio for growth and focus resources in markets with sustainable structures and sufficient local scale. The market in Spain has been challenging with structurally low returns.
Q: What is the CEO of Vodafone’s perspective on the sale?
A: Margherita Della Valle, Chief Executive of Vodafone, sees the sale of Vodafone Spain as a key step in improving the Group’s competitiveness and growth prospects. She thanks the entire team in Spain for their dedication to customers and determination to improve organic performance.
Q: What are the terms of the transaction?
A: On completion, Vodafone’s consideration will be at least €4.1 billion in cash and up to €0.9 billion in RPS. Zegona has debt facilities of up to €4.2 billion to satisfy the cash consideration and plans to raise equity via an institutional placing of new Zegona shares. The RPS will be issued to Vodafone by a newly created entity, FinCo.
Q: What will happen to the RPS?
A: The RPS may pay cash or accrue a compounding dividend at a fixed rate. It is intended that the RPS will be redeemed 6 years after completion, or earlier following a material liquidity event or exit for Zegona that releases funds to its shareholders.
Q: When is the completion of the transaction expected?
A: The completion of the transaction is expected to take place in the first half of 2024, subject to certain approvals and regulatory clearances.
Q: What will happen to the Vodafone brand in Spain post-completion?
A: Vodafone and Zegona will enter into a brand licence agreement, which permits the use of the Vodafone brand in Spain for up to 10 years post-completion.
Q: What other arrangements will Vodafone and Zegona enter into?
A: Vodafone and Zegona will enter into other transitional and long-term arrangements for services including access to procurement, IoT, roaming, and carrier services.
