REG - Vodafone Group Plc - Sale of Vodafone Spain

VodafoneAnnouncement

31/10/2023 07:15

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231031:nRSe8368Ra&default-theme=true

RNS Number : 8368R  Vodafone Group Plc  31 October 2023

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

Sale of Vodafone Spain

31 October 2023

Vodafone Group Plc ("Vodafone") announces that it has entered into binding
agreements with Zegona Communications plc ("Zegona")(1) in relation to the
sale of 100% of Vodafone Holdings Europe, S.L.U. ("Vodafone Spain") (the
"Transaction").

·    On completion, Vodafone's consideration will comprise at least €4.1
billion in cash and up to €0.9 billion in the form of Redeemable Preference
Shares ("RPS") which redeem, for an amount comprising the subscription price
and accrued preferential dividend, no later than 6 years after closing

·    Vodafone and Zegona have entered into an agreement whereby Vodafone
will provide certain services to Vodafone Spain for a total annual service
charge of c.€110 million(2)

·    The enterprise value of €5.0 billion is equivalent to a multiple of
5.3x Adjusted EBITDAaL(3) and 12.7x OpFCF(4) for the 12-month period ended 31
March 2023

Margherita Della Valle, Chief Executive of Vodafone, said:

"The sale of Vodafone Spain is a key step in right-sizing our portfolio for
growth and will enable us to focus our resources in markets with sustainable
structures and sufficient local scale. I would like to thank our entire team
in Spain for their dedication to our customers and relentless determination to
improve our organic performance. However, the market has been challenging with
structurally low returns.

My priority is to create value through growth and improved returns. Following
the recently announced transaction in the UK, Spain is the second of our
larger markets in Europe where we are taking action to improve the Group's
competitiveness and growth prospects."

Summary of Transaction terms

On completion, Vodafone's consideration will comprise at least €4.1 billion
in cash (subject to customary completion adjustments) and up to €0.9 billion
in the form of RPS. Zegona has fully committed debt facilities of up to €4.2
billion available to satisfy the cash consideration and intends to raise
equity via an institutional placing of new Zegona shares to investors prior to
completion of the Transaction, subject to market conditions.

To the extent Zegona's equity raise prior to completion exceeds €400
million, 50% of that excess will be paid to Vodafone in cash at completion and
the number of RPS received will be reduced accordingly.

The RPS will be issued to Vodafone by a newly created entity, EJLSHM Funding
Limited ("FinCo"). FinCo will subscribe for new ordinary shares in Zegona for
an amount, based on the issue price for Zegona's intended equity raise, that
is equivalent to the amount of RPS being subscribed for by Vodafone. The
shares held by FinCo will rank pari passu with Zegona's existing ordinary
shares and the ordinary shares to be issued pursuant to the equity raise. At
FinCo's option, the RPS may pay cash or accrue a compounding dividend, at a
fixed rate of 5% for each of the first 3 years, a step up to 10% in year 4, a
step up to 12.5% in year 5 and 15% thereafter. FinCo will irrevocably
undertake not to exercise its voting rights in Zegona (other than in relation
to a takeover of Zegona). FinCo's sole purpose will be to redeem the RPS and
it is intended that the RPS will be redeemed 6 years after completion, or
earlier following a material liquidity event or exit for Zegona that releases
funds to its shareholders.

Completion of the Transaction is conditional on certain approvals being
obtained from current Zegona shareholders as well as regulatory clearances and
is expected to take place in the first half of 2024. The Transaction is not
subject to any minimum equity raise by Zegona.

At completion, we will review the optimal use of proceeds in the context of a
broader capital allocation review.

Vodafone and Zegona will enter into a brand licence agreement, which permits
the use of the Vodafone brand in Spain for up to 10 years post-completion.
Vodafone and Zegona will enter into other transitional and long-term
arrangements for services including access to procurement, IoT, roaming and
carrier services.

For more information, please contact:

 Investor Relations                            Media Relations
 Investors.vodafone.com                        Vodafone.com/news/contact-us
 ir@vodafone.co.uk (mailto:ir@vodafone.co.uk)  GroupMedia@vodafone.com (mailto: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 Maaike de Bie Group General Counsel and Company
Secretary (Tel: +44 (0)1635 33251).

Advisers

In connection with the Transaction, Morgan Stanley, Robey Warshaw and Evercore
are acting as financial advisers to Vodafone and Slaughter and May is acting
as legal adviser to Vodafone.

Impact on Vodafone

Vodafone will deconsolidate Vodafone Spain from completion of the Transaction.
It is expected that the Transaction will have a slightly accretive effect on
Vodafone's adjusted earnings per share and a dilutive effect on free cash
flow.

Valuation multiple

 

 (€m)                                     12-month period ended 31 March 2023
 Adjusted EBITDAaL(2,3)                   947
 Capex                                    (552)
 OpFCF4                                   395

 Enterprise value                         5,000
 Enterprise value / Adjusted EBITDAaL(3)  5.3x
 Enterprise value / OpFCF4                12.7x

 

About Vodafone Spain

Vodafone Spain is a mobile network operator providing mobile and fixed line
services to both consumer and business customers across Spain. As at 31 March
2023, Vodafone Spain had gross assets of €7.6 billion. For the 12-months
period 31 March 2023, Vodafone Spain generated a loss before tax of €383
million.

About Vodafone

Vodafone is the largest pan-European and African telecoms company. 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.

Vodafone will continue to retain a significant presence in Spain through the
brand license agreement with Zegona and our European R&D Centre in
Málaga.

We provide mobile and fixed services to over 300 million customers in 17
countries, partner with mobile networks in 46 more and are also a world leader
in the Internet of Things (IoT), connecting over 160 million devices and
platforms. With Vodacom Financial Services and M-Pesa, we have the largest
financial technology platform in Africa, serving more than 56 million people
across six countries.

We are committed to reducing our environmental impact to reach net zero
emissions 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.

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

About Zegona

Zegona was established in 2015 with the objective of investing in businesses
in the European TMT sector and improving their performance to deliver
attractive shareholder returns. Zegona is led by former Virgin Media
executives Eamonn O'Hare and Robert Samuelson and is admitted to the standard
listing segment of the Official List and to trading on the Main Market of the
London Stock Exchange.

Notes to announcement

1.     The selling entity is Vodafone Europe B.V. which is a 100% owned
subsidiary of Vodafone Group Plc. The buying entity is Zegona Bidco, S.L.U.
which is a 100% owned subsidiary of Zegona Communications plc

2.     The total annual service charge for each of the first two years of
c.€110 million primarily relates to charges already included within the
Adjusted EBITDAaL of Vodafone Spain

3.     Adjusted EBITDAaL as defined in Non-GAAP measures on page 220 of
the Vodafone Annual Report 2023

4.    OpFCF defined as Adjusted EBITDAaL less capital expenditure

 

 

Important notice

Certain information contained in this document constitutes "forward-looking
statements", which can be identified by the use of terms such as "may",
"will", "should", "expect", "anticipate", "project", "estimate", "intend",
"continue", "target" or "believe" (or the negatives thereof) or other
variations thereon or comparable terminology, or by discussions of strategy,
plans, objectives, goals, future events or intentions. Such statements express
the intentions, opinions, or current expectations of the parties with respect
to possible future events and are based on current plans, estimates and
forecasts, which the parties have made to the best of their respective
knowledge, concerning, among other things, the respective business, results of
operations, financial position, prospects, growth and strategies, statements
regarding the transaction and the anticipated consequences and benefits of the
transaction, and the targeted closing date of the transaction. Due to various
risks and uncertainties, actual events or results or the actual performance
may differ materially from those reflected or contemplated in such
forward-looking statements.

Such risks and uncertainties include, but are not limited to, regulatory
approvals that may require acceptance of conditions with potential adverse
impacts; risks involving the parties' respective ability to realise expected
benefits associated with the transaction; the impact of legal or other
proceedings; and continued growth in the market for telecommunications
services and general economic conditions in the relevant market(s).

Furthermore, a review of the reasons why actual results and developments may
differ materially from the expectations disclosed or implied within
forward-looking statements can be found under "Forward-looking statements" and
"Principal risk factors and uncertainties" in the Vodafone Group Plc's annual
report for the year ended 31 March 2023.

No assurances can be given that the forward-looking statements in this
announcement will be realised. As a result, recipients should not rely on such
forward-looking statements. Subject to compliance with applicable law and
regulations, the parties undertake no obligation to update these
forward-looking statements. No representation or warranty is made as to the
reasonableness of such forward-looking statements. No statement in this
document is intended to be nor may be construed as a profit forecast or
estimate for any period. Actual results could differ materially from those
expressed or implied.

This press release is for information purposes only and is not intended to and
does not constitute, or form part of, any invitation or offer to sell,
dispose, acquire, purchase or subscribe for any securities of any companies
mentioned herein in any jurisdiction, whether pursuant to the transaction or
otherwise. This document shall not be distributed or used by any person or
entity in any jurisdiction where such distribution or use.

 

 

 

 

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  DISMBBFTMTJJMAJ