Swisscom close to €8bn deal to acquire Vodafone Italia

Source: Swisscom

Swisscom is in advanced, exclusive negotiations to acquire Vodafone’s Italian business, the pair have confirmed.

The Swiss telco said it was in talks to acquire 100% of Vodafone italia for cash, and that it planned to merge the Italian operation with its own Swiss subsidiary, Fastweb.

The pair have agreed on a preliminary purchase price for Vodafone Italia of €8 billion on a cash and debt-free basis.

Swisscom said that Vodafone Italia and Fastweb would bring together complementary high-quality mobile and fixed infrastructures, competencies, and capabilities to create a leading converged challenger.

It said that a combined operator with increased scale, a more efficient cost structure and significant synergy potential would unlock value for stakeholders and would be a key step to allow Swisscom to achieve long-term value creation in Italy.

Swisscom expects that any deal will be value and cash flow accretive to it and that, would allow it to retain at least an ‘A’ corporate credit rating and would have a positive impact on dividend policy.

It added the usual caveat that there is no certainty that a deal will be agreed.

Preferred outcome

A sale to Swisscom has been Vodafone’s preferred outcome for its Italian operation, despite some analysts being of the view that a combination with Fastweb offered fewer synergies than a tie-up with Xavier Niel’s Iliad Group, which would have created a market leader in Italy.

At the end of last month the mobile giant rejected a bid by Iliad for Vodafone Italia, despite the French group upping its offer.

Niel’s outfit had proposed a 50:50 merger with the creation of a NewCo that would see Vodafone receive €6.6 billion of cash proceeds and €2.0 billion in the form of a shareholder loan, giving an enterprise value of €10.45 billion, while Iliad itself would get €0.4 billion of cash proceeds and €2.0 billion of shareholder loan, giving an enterprise value of €4.25 billion.

Vodafone appears to believe that a deal with Swisscom, as well as being all-cash, has a greater chance of going through to completion.

The telco said the deal with Swisscom represents a multiple of 26 times consensus expectations for 2024 full-year operating free cashflow and 7.6 times consensus full year adjusted EBITDAaL.

The telco said it had “engaged extensively with several parties to explore market consolidation in Italy and believes this potential transaction delivers the best combination of value creation, upfront cash proceeds and transaction certainty for Vodafone shareholders”.