Vodafone Group to sell Vodafone Spain to Zegona Communications for €5bn

Vodafone Group Plc has made a pivotal move in the telecom industry by agreeing to sell its 100% stake in Vodafone Holdings Europe, S.L.U. (“Vodafone Spain”) to Zegona Communications plc. The total enterprise value of the transaction stands at €5 billion.

Details of the Financial Agreement

The sale is strategically significant for both entities. Vodafone Group Plc will receive at least €4.1 billion in cash and up to €0.9 billion in the form of Redeemable Preference Shares (RPS). This financial layout positions the deal as a noteworthy event in European telecom mergers and acquisitions. The RPS, a key component of the transaction, will redeem no later than 6 years post-closing.

Vodafone Spain’s Enterprise Value and Service Arrangements

Vodafone and Zegona have established an annual service charge agreement of approximately €110 million, as part of the transaction terms. The agreed enterprise value of €5.0 billion represents a multiple of 5.3x adjusted EBITDAaL and 12.7x OpFCF for the period ending 31 March 2023. These figures reflect the robust financial health and strategic value of Vodafone Spain in the telecom market.

CEO’s Statement and Strategic Implications

Margherita Della Valle, Chief Executive of Vodafone, highlighted the sale as a crucial step in optimizing the company’s portfolio for growth. Acknowledging the challenges in the Spanish market, she emphasized focusing resources on markets with sustainable structures. This transaction is a strategic move by Vodafone, following another recent transaction in the UK, to enhance competitiveness and growth prospects.

Transaction Terms and Future Prospects

Zegona, on its part, is prepared with fully committed debt facilities of up to €4.2 billion to satisfy the cash consideration. An equity raise via institutional placing of new Zegona shares is also planned, subject to market conditions. The RPS and equity financing intricacies illustrate the comprehensive nature of this agreement.

Regulatory Approvals and Transaction Completion

The completion of this transaction, subject to regulatory clearances and Zegona shareholder approvals, is anticipated in the first half of 2024. Post-completion, Vodafone and Zegona will enter into multiple agreements, including a brand license and transitional service arrangements, highlighting the long-term strategic planning behind this deal.

The sale of Vodafone Spain to Zegona Communications represents a strategic reshaping of Vodafone’s portfolio, signaling significant shifts in the European telecommunications landscape. As the industry observes this major transaction, its completion and subsequent impacts on the telecom market are eagerly anticipated.