HomeAccessZegona to acquire 100% of Vodafone Spain for up to €5bn

    Zegona to acquire 100% of Vodafone Spain for up to €5bn


    The pair have entered into a binding agreement and expect the deal to close in the first half of next year

    London-based investment fund Zegona has entered into binding agreements with Vodafone Europe to the acquisition of 100% of Vodafone Spain for €5 billion. This price is 3.9 times the opco’s earnings before interest, tax, depreciation and amortisation after leases (EBITDAaL).

    Della Valle makes her mark

    Kester Mann, Director, Consumer and Connectivity at CCS Insight, noted, “Vodafone’s retreat from Spain comes as little surprise. The market was placed under a “strategic review” earlier in the year and rumours of a deal with Zegona have been swirling for weeks. Spain has long dragged Vodafone’s financial performance due to intense market competition and low returns. As such, the disposal is likely to be welcomed by its long-suffering shareholders.

    “When CEO Margherita Della Valle set out her initial strategy for Vodafone in May, she said it “has to change”. Today’s news is the first major tangible evidence of her priority to slim down, refocus and cut debt. She will now be hoping to build on the Spain exit by securing vital regulatory approval to merge with Three in the UK.”

    Vodafone UK is also hoping to merge with Three UK, the two having entered into a binding agreement in June and are now awaiting approvals from the appropriate authorities. If it gets the green light in the UK, this too could substantially improve Vodafone’s outlook.

    Funding matters

    Zegona will fund the acquisition through a combination of: new debt; Vodafone Financing (up to €900 million); and a new equity raise of up to €600 million from third-party investors to be executed before completion. The Zegona fund has entered into committed debt financing of €4.2 billion and a committed revolving credit facility of €0.5 billion. 

    Vodafone Group will provide a brand licence agreement which permits Zegona to use the Vodafone brand in Spain for up to 10 years after the completion of the deal. 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’s strategy

    Eamonn O’Hare, Co-founder, Chair and CEO of Zegona, said, “This financially attractive acquisition marks our third deal in Spain after successful turnarounds at Telecable and Euskatel. With our clearly defined strategy and proven track record, we are confident we can create significant value for shareholders.”

    These acquisitions and subsequent sales consolidated the Spanish telecoms market, reducing the number of main operators from five to four. It’s remains to be seen what Zegona will do with the acquisition in the longer term – given its strategy is buy, fix, sell – but it could be operating in a very different competitive landscape if the proposed merger between Orange Spain and MASMOVIL is allowed to proceed.

    Last week Orange and MASMOVIL having made a binding agreement and offered remedies to improve its chances of approval by the European Commission last week. If that merger is allowed, it will dramatically change the Spanish market, creating a heavyweight to rival incumbent Telefonica.

    The repercussions will be felt further afield than Spain, as Mann notes, “Orange/MasMovil is a crucial alliance for the European telecoms sector as it could open the door to other tie-ups if approved. The Commission probably wanted some clarity on Vodafone’s long-term position in Spain before deciding, so today’s news could help that process along.”