REG - Vodafone Group Plc - CO-CONTROL PARTNERSHIP FOR VANTAGE TOWERS

VodafoneAnnouncement

09/11/2022 09:30

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221109:nRSI8294Fa&default-theme=true

RNS Number : 8294F  Vodafone Group Plc  09 November 2022

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION. THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION FOR IMMEDIATE RELEASE

 

VODAFONE ENTERS INTO A CO-CONTROL PARTNERSHIP WITH GIP AND KKR

FOR VANTAGE TOWERS

 

9 November 2022

 

·   Strategic co-control partnership with long-term investors with
significant expertise in digital infrastructure to accelerate Vantage Towers'
growth and value creation

·    Creation of a JV with GIP and KKR, to hold Vodafone's 81.7% stake in
Vantage Towers which will be deconsolidated by Vodafone

·    Attractive valuation of €32.0 per share, a premium of 19% to
Vantage Towers' 3 month volume-weighted average share price and a multiple of
26x adjusted EBITDAaL for the 12 month period ended 31 March 2022

·    JV to make a voluntary takeover offer for the outstanding Vantage
Towers shares held by minority shareholders, funded through new debt in the JV
and equity from GIP and KKR

·    Minimum net cash proceeds to Vodafone of €3.2 billion, based on
equity from GIP and KKR that is fully committed at signing and maximum
minority take up in the voluntary takeover offer, which would reduce
Vodafone's leverage by 0.2x

·   Maximum net cash proceeds of €5.8-7.1 billion(1), depending on the
take up in the voluntary takeover offer and subject to GIP and KKR raising
further equity before closing to increase their stake in the JV to 50%,
reducing leverage by 0.4x-0.5x

·    Transaction conditional on regulatory clearances and expected to
close in the first half of 2023

 

Nick Read, Vodafone Group Chief Executive said: "This is a landmark moment for
both Vodafone and Vantage Towers. This transaction successfully delivers on
Vodafone's stated aims of retaining co-control over a strategically important
asset, deconsolidating Vantage Towers from our balance sheet to ensure we can
optimise its capital structure and generate substantial upfront cash proceeds
for the Group to support our priority of deleveraging. We are excited to
partner with GIP and KKR, both world-class investors who bring significant
expertise in digital infrastructure and share our long-term vision for Vantage
Towers as we collectively take the business to the next stage of its growth."

Will Brilliant, Partner and Head of Digital Infrastructure at GIP said: "We're
delighted to join forces with Vodafone and KKR to invest in Vantage Towers, a
high-quality European tower portfolio with strong upside potential. We are
looking forward to capturing the exciting value-creating opportunities in the
European telecoms infrastructure sector by advancing Vantage Towers' strategy
and supporting its capacity to build new sites. As strategic partners with
Vodafone and KKR, we will bring our deep infrastructure expertise and
resources to help the company deliver the best data connectivity for
individuals and businesses and contribute to enabling Europe's digital future
in the interest of all stakeholders."

Vincent Policard, Partner and Co-Head of European Infrastructure at KKR said:
"Together with our strategic partners Vodafone and GIP, we believe Vantage
Towers' high-quality footprint and network across the region ideally position
it to meet the ever-growing demand for mobile connectivity in Europe. We have
a shared goal of creating a pan-European telecoms champion by continuing to
grow and develop the business, leveraging the Consortium's significant
telecoms infrastructure investment experience and global resources. At KKR we
are long-term conviction investors in Europe's digital infrastructure and at
Vantage Towers we intend to pursue value-creating investments to capitalise on
the growth in this sector and to help drive consolidation in a fragmented
market."

Transaction overview

Vodafone Group Plc ("Vodafone") announces today that it has entered into a
strategic co-control partnership with a consortium of long-term infrastructure
investors led by Global Infrastructure Partners ("GIP") and KKR (together the
"Consortium") for Vodafone's 81.7% stake in Vantage Towers AG ("Vantage
Towers").

Vodafone and the Consortium have created a joint venture (the "JV") which will
hold Vodafone's 81.7% stake in Vantage Towers. Vodafone will contribute its
shares in Vantage Towers into the JV by way of a capital increase against new
JV shares. The Consortium will obtain a shareholding in the JV of up to 50% by
acquiring JV shares from Vodafone for cash.

In parallel with this announcement, the JV has announced today that it will
make a voluntary takeover offer ("VTO") for the outstanding Vantage Towers
shares held by minority shareholders pursuant to Section 10 of the German
Securities Acquisition and Takeover Act. Completion of the VTO will be
conditional on customary conditions, including obtaining regulatory clearances
for the partnership between Vodafone and the Consortium. The full terms and
conditions of the VTO will be set out in a separate offer document to be
approved by the German Federal Financial Supervisory Authority (BaFin).
Following approval by BaFin, the offer document will be published and the
acceptance period for the VTO will commence. The offer document (once
available) and other information pertaining to the VTO will be made available
on the following website: https://angebot.wpueg.de/oak/
(https://angebot.wpueg.de/oak/)

The JV has received support from RRJ Capital in the form of an irrevocable
undertaking to accept the VTO. RRJ Capital is Vantage Towers' second largest
minority shareholder and owns 2.4% of its ordinary share capital in issue (or
13% of the total minorities).

Strategic co-control partnership

Vodafone and the Consortium share a joint ambition to accelerate growth and
create further value at Vantage Towers. GIP and KKR both have extensive
experience investing in and operating digital infrastructure companies. As
long-term partners with an industrial mindset, Vodafone and the Consortium
intend to enhance the business' growth profile and profitability by supporting
it in:

·    Delivering an ambitious build-to-suit programme which enables mobile
network operators to meet their coverage obligations and densification
requirements;

·    Capturing additional co-location opportunities from new and existing
third-party customers;

·    Pursuing meaningful growth opportunities in adjacent areas such as
small cells and distributed antenna systems for 5G capacity expansion, as well
as edge computing;

·    Pursuing other growth-accretive investments, including actively
participating in the consolidation of the European tower landscape; and

·    Enhancing profitability through continuous operational improvements.

As a result of the transaction, Vodafone will deconsolidate Vantage Towers and
equity account for its interest in the JV which will allow Vantage Towers to
optimise its capital structure and help drive its pursuit of the above growth
opportunities.

Summary valuation and financing

The transaction delivers an attractive valuation of €32.0 per Vantage Towers
share to Vodafone as well as to minority shareholders through the VTO. This
represents a 19% premium to the Vantage Towers 3 month volume-weighted average
share price ("VWAP") as of 8 November 2022 and 33% to the March 2021 initial
public offering ("IPO") price of €24.0 per share. The transaction values
Vantage Towers at an equity value of €16.2 billion, implying an EV /
adjusted EBITDAaL multiple of 26x for the 12 month period ended 31 March
2022(2). This represents a significant premium to trading multiples of
publicly listed European tower companies and is in line with precedent
transactions.

The Consortium has fully committed equity in place to obtain a shareholding in
the JV of between 32% and 40%, depending on the level of take-up in the VTO by
minority shareholders. The Consortium intends to raise additional equity
before completion to reach a shareholding of 50%. The JV will fund the
acquisition of Vantage Towers shares from minority shareholders in the VTO
through €1.6 billion of incremental debt, which will be non-recourse to
Vodafone, and equity from GIP and KKR. The table below summarises the range of
potential outcomes depending on the level of take-up by minority investors in
the VTO and additional Consortium investment.

 

 (€bn)
 Minority take up                           0%(1)     100%
 Acquisition of minorities                  0.0       (3.0)
 Additional JV debt (net of existing debt)  1.6       1.6
 Committed cash from Consortium             4.7       4.7
 Other(4)                                   (0.3)     (0.2)
 Minimum net cash proceeds to Vodafone      6.0       3.2
 Implied Consortium JV shareholding (%)     40%       32%
 Net additional cash from Consortium(4)     1.1       2.6
 Maximum net cash proceeds to Vodafone      7.1       5.8
 Implied Consortium JV shareholding (%)     50%       50%

 

Subject to the take-up in the VTO by minority shareholders and the resulting
leverage of the JV, Vodafone may sell a proportion of its current Vantage
Towers shareholding to the JV for cash and the Consortium may contribute cash
to the JV in exchange for new JV shares. The minimum net cash proceeds to
Vodafone will be €3.2 billion based on 100% take up in the VTO. The maximum
total net cash proceeds to Vodafone based on a 50% shareholding for the
Consortium will be between €5.8 billion and €7.1 billion(1), depending on
the take up in the VTO.

Should the Consortium own less than a 50% shareholding on 30 June 2023,
Vodafone will have the right to sell JV shares to third party investors to
reduce its own stake to 50%, outside of lock-up provisions and other
restrictions.

DPLTA and squeeze-out intentions

The JV intends to implement a domination profit and loss transfer agreement
("DPLTA") if the aggregate JV holding in Vantage Towers following the VTO is
below 95%, or a squeeze out of minority shareholders if the aggregate JV
holding in Vantage Towers is 95% or higher following the VTO.

Post-closing, Vodafone and the Consortium will consider removing Vantage
Towers' public listing from the Frankfurt Stock Exchange.

Dividend policy

Post-closing, the JV intends to pay annual dividends from excess free cashflow
to the shareholders, subject to market and operating conditions.

Governance

Vodafone and the Consortium will have balanced governance rights in the JV,
with equal voting rights. The current leadership team will continue to lead
Vantage Towers to deliver the next phase of growth.

It is the intention of both Vodafone and the Consortium to build Vantage
Towers' success for the long term.  As is customary for such partnerships,
certain provisions have been agreed to give the shareholders strategic and
financial flexibility. In particular, Vodafone and the Consortium have agreed
to a lock-up period of 3 years post-closing of the transaction, after which
each shareholder will be able to initiate a full or partial sale of its
shareholding in the JV, subject to a right of first offer in favour of the
other shareholder.

Impact on Vodafone

Vodafone will deconsolidate Vantage Towers and equity account for its interest
in the JV from closing of the transaction. It is expected that the transaction
will have a slightly dilutive effect on Vodafone's adjusted earnings per share
and free cash flow.

Sale proceeds are intended to be used for deleveraging and will reduce net
debt/EBITDAaL by 0.2-0.5x(3), in line with Vodafone's medium-term ambition to
reduce leverage to the bottom end of its 2.5-3.0x range.

As at 31 March 2022, Vantage Towers had gross assets of €10.5 billion. For
the 12 months ended 31 March 2022, Vantage Towers generated profit before tax
of €251 million.

Additional information

The transaction is subject to customary antitrust and FDI approvals and is
expected to close in the first half of 2023.

Following Vodafone's H1 FY23 results on 15 November, there will be a webcast
Q&A session at 10am UKT for equity research analysts.

Transaction advisers

In connection with the transaction, Robey Warshaw and UBS are acting as
financial advisers to Vodafone, and Linklaters is acting as legal adviser to
Vodafone.

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No 596/2014 as it forms part of domestic UK
law as defined in the Market Abuse (Amendment) (EU Exit) Regulations (SI
2019/310).

For more information, please contact:

Investor
Relations
Media Relations

Investors.vodafone.com                        Vodafone.com/media/contact

ir@vodafone.co.uk
 GroupMedia@vodafone.com

 

Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14
2FN, England. Registered in England No. 1833679

 

Person responsible

The person responsible for arranging the release of this announcement on
behalf of Vodafone is Rosemary Martin, Group General Counsel and Company
Secretary (Tel: +44 (0)1635 33251)

About Vodafone

Unique in its scale as the largest pan-European and African technology
communications company, Vodafone transforms the way we live and work through
its innovation, technology, connectivity, platforms, products and services.

Vodafone operates mobile and fixed networks in 22 countries, and partners with
mobile networks in 47 more. As of 30 June 2022, we had over 300 million mobile
customers, more than 28 million fixed broadband customers and 22 million TV
customers. Vodafone is a world leader in the Internet of Things ("IoT"),
connecting around 160 million devices and platforms.

We have revolutionised fintech in Africa through M-Pesa, which celebrates its
15th anniversary in 2022. It is the region's largest fintech platform,
providing access to financial services for more than 50 million people in a
secure, affordable and convenient way.

Our purpose is to connect for a better future by using technology to improve
lives, digitalise critical sectors and enable inclusive and sustainable
digital societies.

We are committed to reducing our environmental impact to reach net zero
emissions across our full value chain by 2040, while helping our customers
reduce their own carbon emissions by 350 million tonnes by 2030. We are
driving action to reduce device waste and achieve our target to reuse, resell
or recycle 100% of our network waste.

We believe in the power of connectivity and digital services to improve
society and economies, partnering with governments to digitalise healthcare,
education and agriculture and create cleaner, safer cities. Our products and
services support the digitalisation of businesses, particularly small and
medium enterprises (SMEs).

Our inclusion for all strategy seeks to ensure no-one is left behind through
access to connectivity, digital skills and creating relevant products and
services such as access to education, healthcare and finance. We are also
committed to developing a diverse and inclusive workforce that reflects the
customers and societies we serve.

For more information, please visit http://www.vodafone.com
(http://www.vodafone.com) , follow us on Twitter at @VodafoneGroup or connect
with us on LinkedIn at http://www.linkedin.com/company/vodafone
(http://www.linkedin.com/company/vodafone) .

About Vantage Towers

Vantage Towers AG is a leading tower company in Europe with around 83,000
sites in ten countries, connecting people, businesses and devices in cities
and rural areas.

The company was founded in 2020 and is headquartered in Düsseldorf, Germany.
Vantage Towers has been listed on the Deutsche Börse's Prime Standard Index
in Frankfurt since 18 March 2021. On 20 September the company was admitted to
the MDAX and TecDAX.

Vantage Towers' portfolio includes towers, masts, rooftop sites, distributed
antenna systems (DAS) and small cells. By building, operating and leasing this
passive infrastructure to MNOs, IoT providers or public utility companies
Vantage Towers is making a significant contribution to better connectivity and
the sustainable digital transformation of Europe.

For more information, please visit our website at
http://www.vantagetowers.com, follow us on Twitter at @VantageTowers or
connect with us on LinkedIn at http://www.linkedin.com/company/vantagetowers

About GIP

GIP is a leading independent infrastructure fund manager that makes equity and
debt investments in infrastructure assets and businesses. GIP targets
investments in the energy, transport, digital infrastructure, and water/waste
sectors in both OECD and select emerging market countries. Headquartered in
New York, GIP operates out of 10 offices: New York, London, Stamford
(Connecticut), Sydney, Melbourne, Brisbane, Mumbai, Delhi, Singapore and Hong
Kong. GIP manages c. US $84 billion for its investors. GIP's portfolio
companies have combined annual revenues of c. US $68 billion and employ over
100,000 people. For more information, visit www.global-infra.com.

About KKR

KKR is a leading global investment firm that offers alternative asset
management as well as capital markets and insurance solutions. KKR aims to
generate attractive investment returns by following a patient and disciplined
investment approach, employing world-class people and supporting growth in its
portfolio companies and communities. KKR sponsors investment funds that invest
in private equity, credit and real assets and has strategic partners that
manage hedge funds. KKR's insurance subsidiaries offer retirement, life and
reinsurance products under the management of Global Atlantic Financial Group.
References to KKR's investments may include the activities of its sponsored
funds and insurance subsidiaries.

KKR established its Global Infrastructure business in 2008 and has since grown
to one of the largest infrastructure investors globally with a team of more
than 75 dedicated investment professionals. The firm currently oversees
approximately US$50 billion in infrastructure assets globally as of 30
September, 2022, and has made over 65 infrastructure investments across a
range of sub-sectors and geographies. KKR's infrastructure platform is devised
specifically for long term, capital intensive structural investments.

For additional information about KKR & Co. Inc. (NYSE: KKR), please visit
KKR's website at www.kkr.com and on Twitter @KKR_Co.

Forward-looking statements

The information in this announcement (the "Information") may constitute or
include forward-looking statements. Forward-looking statements include,
without limitation, statements that typically contain words such as
"anticipate", "target", "expect", "estimate", "intend", "plan", "believe",
"hope", "aims", "continue", "will", "may", "should", "would", "could", or
other words of similar meaning. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. Vodafone cautions you
that forward-looking statements are not guarantees of the occurrence of such
future events or of future performance and that in particular the actual
results of operations, financial condition and liquidity, the development of
the industry in which Vodafone, the Vodafone Group, Vantage Towers and other
persons involved in the transaction operate and the outcome or impact of the
transaction and related matters on Vodafone, the Vodafone Group and/or Vantage
Towers or other persons may differ materially from those made in or suggested
by the forward-looking statements contained in the Information. These
expectations or any forward-looking statements could prove to be incorrect,
and outcomes usually cannot be influenced by Vodafone, the Vodafone Group
and/or Vantage Towers. It should be kept in mind that actual events or
consequences may differ materially from expectations.

Vodafone expressly disclaims any obligation or undertaking to release any
updates or revisions to any forward-looking statements to reflect any change
in Vodafone's expectations with regard thereto or any changes in events,
conditions or circumstances on which any forward-looking statements are based.
No representation or warranty is made that any of these forward-looking
statements will come to pass or that any particular result will be achieved.
Undue influence should not be given to, and no reliance should be placed on,
any forward-looking statement. No statement in the Information is intended to
be nor may be construed as a profit forecast or valuation.

Notes to announcement

1)    Transaction effects exclude impact from the irrevocable undertaking
received from RRJ Capital

2)   Based on adjusted consolidated EBITDAaL of €543 million for the 12
month period ended 31 March 2022 and a total enterprise value of €13.9
billion. Enterprise value is based on: 505.8 million shares multiplied by the
offer price of €32 per share, plus Vantage Towers' net debt (€1.9 billion,
as of 31 March 2022), less adjustments (€4.2 billion) for Vantage Towers'
shareholdings in INWIT (33.2%) and CTIL (50.0%), divided by Vantage Towers'
consolidated EBITDAaL (which excludes Inwit and CTIL)

3)    Leverage impact will depend on the level of equity investment by the
Consortium and minority take-up in the VTO

4)    Includes adjustment for cash tax and fees payable as a result of the
transaction

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  DISEANFNEALAFEA