Zegona to acquire Vodafone Spain for €5bn

Source: Vodafone

Zegona Communications has confirmed its acquisition of Vodafone España for €5 billion, marking the UK ‘buy-fix-sell’ investor’s second foray into the Spanish telecoms market.

The announcement follows press reports in recent days that a deal was imminent.

Zegona has entered into committed debt financing of €4.2 billion and a committed revolving credit facility of €0.5 billion. Post equity raise the new debt facility is anticipated to deliver a net debt position at Completion of €3.7 billion, representing 2.9x leverage1

Comfirming information obtained by Spanish financial daily Expansión, Vodafone will provide up to €900 million financing in the form of an investment in preference shares in a new company that will use the financing to invest in Zegona shares at £1.50 per share.

Zegona said it would raise equity of up to €600 million from third party investors to be executed before completion, which is expected in the first quarter of next year.

Under the terms of the deal, Zegona will be able to use the Vodafone brand in Spain for up to 10 years post-completion of the acquisition.

Vodafone and Zegona will enter into other transitional and long-term arrangements for services including access to procurement, IoT, mobile roaming and carrier services.

Zegona intends to install José Miguel García, the experiences Spanish telecoms exec who was chief executive of northern Spanish cable operator Euskaltel under Zegona’s direction and helped put that company in shape for its acquisition by MásMóvil, as CEO. García also previously served as CEO of Jazztel ahead of its acquisition by Orange.

The acquisition gives Zegona ownership of Spain’s number three multi-play operator, with a gigabit network that passes 10.7 million homes and owns a high-quality mobile network. Despite this, Vodafone has struggled in the highly competitive Spanish market against competition from Telefónica/Movistar, Orange, MásMóvil and new entrant Digi.

The €5 billion price tag represents a multiple of 3.9x EBITDAaL.

“We are very excited about the opportunity to return to the Spanish telecoms market. This financially attractive acquisition marks our third deal in Spain after successful turnarounds at Telecable and Euskaltel. With our clearly defined strategy and proven track record, we are confident that we can create significant value for shareholders,” said Eamonn O’Hare, Zegona’s chairman and CEO.