REG - Zegona Comms. - Zegona to acquire Vodafone Spain for EUR 5.0bn

Zegona CommunicationsAnnouncement

31/10/2023 07:15

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RNS Number : 8350R  Zegona Communications PLC  31 October 2023

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INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION. THIS
ANNOUNCEMENT DOES NOT CONSTITUTE A TAKEOVER OFFER OR AN OFFER OF SECURITIES.
NO OFFER OR SALE OF SECURITIES MAY OCCUR IN THE UNITED STATES UNLESS THE
TRANSACTION HAS BEEN REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS
AMENDED OR IS EXEMPT FROM REGISTRATION THEREUNDER.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION for the purposes of Article 7 of
the UK version of the Market Abuse Regulation (EU 596/2014) which is part of
UK law by virtue of the European Union (Withdrawal) Act 2018.

 

31 October 2023

Zegona to acquire Vodafone Spain for €5.0 billion

Zegona announces that it has entered into binding agreements with Vodafone
Europe B.V. ("Vodafone")  in relation to the acquisition of 100% of Vodafone
Holdings Europe, S.L.U. ("Vodafone Spain") for €5.0 billion (the
"Acquisition").

·     Transaction values Vodafone Spain at an enterprise value of €5.0
billion, representing a multiple of 3.9x EBITDAaL

·     Zegona will fund the Acquisition through a combination of new debt,
Vodafone Financing and a new equity raise

o   Zegona has entered into committed debt financing of €4.2 billion and a
committed revolving credit facility of €0.5 billion. Post equity raise the
new debt facility is anticipated to deliver a net debt position at Completion
of €3.7 billion, representing 2.9x leverage(1)

o   Vodafone will provide up to €900 million financing(2)

o   Zegona equity raise of up to €600 million from third party investors
to be executed before completion(3)

·     Vodafone Group plc will provide a brand licence agreement which
permits Zegona to use 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,
mobile roaming and carrier services.

Eamonn O'Hare, Zegona's Chairman and CEO, said:

"We are very excited about the opportunity to return to the Spanish telecoms
market.  This financially attractive acquisition marks our third deal in
Spain after successful turnarounds at Telecable and Euskaltel. With our
clearly defined strategy and proven track record, we are confident that we can
create significant value for shareholders."

 

Vodafone Spain is strategically attractive

·     Vodafone is the No. 3 player in Spain with significant market
shares in mobile, broadband and TV

·     Scale business with significant cash flow potential: FY23 €3.9
billion revenue, €1.3 billion EBITDAaL, €0.4 billion Cash Flow

·     Leading integrated operator with strong market positions in both
consumer and B2B segments

·     Three strong brands and a highly converged customer base

·     Gigabit capable fixed network passing 10.7 million homes with
access to c.95% coverage

·     High quality, market leading, mobile network with 4G / 5G spectrum
advantage

Opportunity to deliver significant value for Zegona shareholders

·     Transform the business to deliver exceptional service to customers
and attractive returns for investors

·     Inject highly experienced management, including the proposed
appointment of José Miguel García as CEO (ex-Jazztel and Euskaltel CEO)

·     Improve efficiency by reducing complexity and driving productivity

·     Stabilise revenues with new commercial initiatives

Key transaction terms

Vodafone will provide financing of up to €900 million through an investment
in preference shares ("Vodafone Financing") in a newly created entity, EJLSHM
Funding Limited ("Newco"), which will use the funds to subscribe for new
ordinary shares in Zegona ("Ordinary Shares"). Newco will be responsible for
paying the dividends due on the Vodafone Financing and for redeeming the
preference shares. Newco will irrevocably undertake not to exercise its voting
rights in Zegona (other than in connection with a takeover). The preference
shares are transferable and are redeemable by no later than the 6(th)
anniversary of their issue.  Once the preference shares have been fully
redeemed and Zegona's shareholders have been given six months' notice, Newco's
holding of Zegona Ordinary Shares will be deferred, effectively removing them
from Zegona's capital structure. Following Newco's deferral of Ordinary
Shares, Zegona's other shareholders will receive all incremental equity value
created by the business.

To the extent Zegona's equity raise exceeds €400 million, 50% of the equity
raised above €400 million shall be paid to Vodafone in cash at completion
and the Vodafone Financing and corresponding number of preference shares will
be reduced accordingly.

Newco's shares in Zegona will rank pari passu with Zegona's existing Ordinary
Shares and the Ordinary Shares to be issued pursuant to Zegona's equity raise.

Completion of the Acquisition is conditional on certain approvals being
obtained from Zegona shareholders as well as regulatory clearances. Zegona is
targeting completion in Q1 2024.

Equity fundraising

Zegona expects to launch an equity raise with a target of €300 million to
€600 million in gross proceeds via an institutional placing of new Ordinary
Shares ("New Zegona Shares"). This is expected to be launched prior to
Completion. The Company is proposing to issue New Zegona Ordinary Shares at
£1.50 per share.  The equity raise is not a condition of the Acquisition.
Zegona will make a further announcement in relation to the equity fundraising
in due course.

Suspension of listing

Should the Acquisition complete, it will constitute a reverse takeover under
the ‎Listing Rules. The Company will need to apply for the re-admission of
its shares to the standard listing segment of the Official ‎List and the
Main Market of the London Stock Exchange on the basis that the FCA approves
the eligibility of the Company, following completion of the Acquisition as a
result of the reverse takeover, in accordance with Listing Rule 5.6.21. As the
Company is currently unable to provide a full disclosure under Listing Rule
5.6.15, the admission of the existing Zegona Shares to the standard listing
segment of the Official List and trading from the London Stock Exchange
remains suspended pending the publication of a prospectus providing further
detail on Vodafone Spain and the Zegona Group as enlarged by the Acquisition.

General Meeting

Details of the general meeting of Zegona to approve various aspects of the
Acquisition and the circular to be sent to shareholders in connection with the
general meeting will be available on Zegona's website, www.Zegona.com
(http://www.Zegona.com) in due course.

Deutsche Numis is acting as lead financial advisor to Zegona. ING Bank, UBS
and UniCredit Bank also advised Zegona. Deutsche Bank Aktiengesellschaft, ING
Bank N.V., Sucursal en España and UniCredit Bank AG  are leading the
financing in connection with the Acquisition and acting as bookrunners and
Deutsche Bank AG, Filiale Luxembourg, ING Bank N.V., Sucursal en España and
UniCredit Bank AG are acting as underwriters of the debt financing. Deutsche
Numis is acting as global co-ordinator and joint bookrunner, with Canaccord,
ING and UniCredit acting as joint bookrunners in connection with the planned
equity fundraising.

Travers Smith LLP is acting as legal counsel to Zegona in connection with the
Acquisition and Milbank LLP is acting as legal counsel to Zegona in connection
with the debt funding. Allen & Overy LLP is acting for the bookrunners and
underwriters in connection with the debt funding and Simmons & Simmons LLP
is acting for the global co-ordinator and joint bookrunners in connection with
the planned equity fundraising.

 

Enquiries:

 Tavistock (UK Public Relations adviser)                              LLYC (Spain Public Relations adviser)

 Lulu Bridges                                                         Guillermo Segura

 lulu.bridges@tavistock.co.uk (mailto:lulu.bridges@tavistock.co.uk)   gsegura@llorenteycuenca.com (mailto:gsegura@llorenteycuenca.com)

 Tel:  07831 170 364

 Jos Simson                                                           Valvanera Lecha

 jos.simson@tavistock.co.uk (mailto:jos.simson@tavistock.co.uk)       vlecha@llorenteycuenca.com

 

 

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.  For
more information go to www.zegona.com (http://www.zegona.com)

 

About Vodafone

Vodafone is the largest pan-European and African telecoms company. Its purpose
is to connect for a better future by using technology to improve lives,
digitalise critical sectors and enable inclusive and sustainable digital
societies.

It provides mobile and fixed services to over 300 million customers in 17
countries, partners with mobile networks in 46 more and is also a world leader
in the Internet of Things (IoT), connecting over 160 million devices and
platforms. With Vodacom Financial Services and M-Pesa, the largest financial
technology platform in Africa, it serves more than 56 million people across
six countries.

It is committed to reducing its environmental impact to reach net zero
emissions by 2040, while helping its customers reduce their own carbon
emissions by 350 million tonnes by 2030. It is driving action to reduce
device waste and achieve its target to reuse, resell or recycle 100% of its
network waste.

 

Notes to announcement:

1.     Zegona has €4.2 billion committed financing at signing.  This
will be reduced through proceeds from Zegona's equity raise which is expected
to target between €300 million to €600 million in gross proceeds, with
€3.7 billion net debt at Completion assuming a €600 million equity raise.
At €300 million equity raise, the Vodafone Financing(2) will be €900
million, total Zegona equity will be €1.2 billion and net debt at Completion
is anticipated to be €3.9 billion (before taking account of other
anticipated Vodafone Spain cash balances at Completion).

2.     Vodafone Financing to be provided through an investment in
preference shares into a new company which will use that financing to
subscribe for Zegona shares at £1.50 per share

3.     Zegona equity raise target €300 million to €600 million

 

Defined Terms:

 Banks               Deutsche Bank, Deutsche Bank, Filiale Luxembourg, Deutsche Numis, UBS,
                     Canaccord, ING and UniCredit
 Canaccord           Canaccord Genuity Limited
 Cash Flow           Cash Flow defined as EBITDAaL - Capex (excluding license and spectrum fees)
 Completion          completion of the Acquisition
 Deutsche Bank       Deutsche Bank AG
 Deutsche Numis      Deutsche Bank AG, acting through its London branch (which is trading for these
                     purposes as Deutsche Numis)
 EBITDAaL            EBITDAaL is a non-IFRS measure and is defined as Vodafone Group plc Spain
                     segment Adjusted EBITDAaL adjusted to be in line with Zegona's accounting
                     policy relating to subscriber acquisition costs
 Enlarged Group      the Zegona Group, as at and from Completion, as enlarged by Vodafone Spain
 ING                 ING Bank N.V. and ING Bank N.V., Sucursal en España
 Newco               EJLSHM Funding Limited
 UBS                 UBS AG, London Branch
 UniCredit           UniCredit Bank AG, Milan Branch
 Vodafone Financing  the financing to be provided by Vodafone through an investment in preference
                     shares in Newco, the proceeds of which will be used to subscribe for new
                     ordinary shares in Zegona at £1.50 per share;
 Vodafone Spain      Vodafone Holdings Europe, S.L.U. and its consolidated subsidiaries
 Zegona Group        the Company and its subsidiaries

 

 

IMPORTANT INFORMATION

This Announcement is an announcement and not a circular or prospectus or
equivalent document and prospective investors should not make any investment
decision on the basis of its contents. A shareholder circular containing the
resolutions relating to the Transaction to be voted on by Zegona Shareholders
and a notice of General Meeting is expected to be sent to Zegona Shareholders
today.

Neither this Announcement nor any copy of it may be taken or transmitted
directly or indirectly into or from any jurisdiction where to do so would
constitute a violation of the relevant laws or regulations of such
jurisdiction. Any failure to comply with this restriction may constitute a
violation of such laws or regulations. Persons into whose possession this
Announcement or other information referred to herein should inform themselves
about, and observe, any restrictions in such laws or regulations.

Nothing in this Announcement constitutes an offer of securities for sale in
any jurisdiction. Neither this Announcement nor any part of it constitutes or
forms part of any offer to issue or sell, or the solicitation of an offer to
acquire, purchase or subscribe for, any of the Company's securities in the
United States, Canada, Australia, Japan or South Africa or any other
jurisdiction in which the same would be unlawful.  The securities of the
Company may not be offered or sold in the United States absent registration
under the US Securities Act, or an exemption therefrom. The securities
referred to herein have not been and will not be registered under the US
Securities Act or under the securities laws of any state or other jurisdiction
of the United States, and may not be offered or sold, taken up, resold,
transferred or delivered in the United States except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
US Securities Act and in accordance with any applicable securities laws of any
state or other jurisdiction of the United States. There has not been and will
be no public offer of the Company's securities in the United States.

'Deutsche Numis' is a trading name used by certain investment banking
businesses of Deutsche Bank AG ("Deutsche Bank"), Numis Securities Limited and
Numis Europe Limited in the United Kingdom and Ireland, Numis Securities
Limited and Numis Europe Limited are members of the group of companies
controlled by Deutsche Bank AG. Deutsche Bank AG is a stock corporation
(Aktiengesellschaft) incorporated under the laws of the Federal Republic of
Germany, with its principal office in Frankfurt. It is registered with the
district court (Amtsgericht) in Frankfurt am Main under No HRB 30 000 and
licensed to carry on banking business and to provide financial services. The
London branch of Deutsche Bank AG is registered in the register of companies
for England and Wales (registration number BR000005) with its registered
address and principal place of business at Winchester House, 1 Great
Winchester Street, London EC2N 2DB. Deutsche Bank AG subject to supervision by
the European Central Bank (ECB), Sonnemannstrasse 22, 60314, Frankfurt am
Main, Germany, and the German Federal Financial Supervisory Authority
Bundesanstalt für Finanzdienstleistungsaufsicht or BaFin), Graurheindorfer
Strasse 108, 53117 Bonn and Marie-Curie-Strasse 24-28, 60439 Frankfurt am
Main, Germany. With respect to activities undertaken in the United Kingdom,
Deutsche Bank AG is authorised by the Prudential Regulatory Authority (the
"PRA"). It is subject to regulation by the FCA and limited regulation by the
PRA. Details about the extent of Deutsche Bank AG's authorisation and
regulation by the PRA are available from Deutsche Bank AG on request. Numis
Securities Limited is authorised and regulated by the Financial Conduct
Authority (the "FCA")  in the United Kingdom. Numis Europe Limited trading as
Numis is regulated by the Central Bank of Ireland.

UBS is authorised and regulated by the Financial Market Supervisory Authority
in Switzerland and authorised by the PRA and subject to regulation by the FCA
and limited regulation by the PRA in the United Kingdom.

Canaccord is authorised and regulated by the FCA in the United Kingdom.

ING is supervised by the European Central Bank (ECB), The Dutch Central Bank
(De Nederlandsche Bank) and the Netherlands Authority for the Financial
Markets (AFM). UniCredit is a universal bank with its registered office and
principal place of business in Arabellastrasse 12, Munich, Germany. It is
entered under HRB 42148 in the B section of the Commercial Register Maintained
by Munich Local Court.

UniCredit Bank AG is an affiliate of UniCredit S.p.A., Milan, Italy (ultimate
parent company). UniCredit Bank AG is subject to regulation by the European
Central Bank and Federal Financial Supervisory Authority (BaFin). UniCredit
Bank AG, Milan Branch is regulated by Banca d'Italia, the Commissione
Nazionale per le Società e la Borsa (CONSOB) and the Federal Financial
Supervisory Authority (BaFin). Details about the extent of UniCredit Bank AG's
regulation are available on request.

Each of the Banks is acting exclusively for the Company and no one else in
connection with the Acquisition, the contents of this Announcement or any
other matters described in this Announcement. None of the Banks will regard
any other person as its client in relation to the Acquisition, the content of
this Announcement or any other matters described in this Announcement and nor
will any of them be responsible to anyone other than the Company for providing
the protections afforded to its clients or for providing advice to any other
person in relation to the Acquisition, the content of this Announcement or any
other matters referred to in this Announcement.

Certain statements contained in this Announcement are forward-looking
statements and are based on current expectations, estimates and projections
about the expected effects of the Acquisition on the Zegona Group, Vodafone
Spain and the Enlarged Group, the anticipated timing and benefits of the
Acquisition, the Zegona Group's and Vodafone Spain's anticipated standalone or
combined financial results and outlook, the industry and markets in which the
Zegona Group, Vodafone Spain and, the Enlarged Group operate and the beliefs,
and assumptions made by the Directors. Words such as "expects", "should",
"intends", "plans", "believes", "estimates", "projects", "may", "targets",
"would", "could" and variations of such words and similar expressions are
intended to identify such forward-looking statements and expectations. These
statements are based on the current expectations of the management of the
Company, Vodafone Spain or Vodafone Group (as the case may be) and are subject
to uncertainty and changes in circumstances and involve risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied in such forward-looking statements. As such,
forward-looking statements should be construed in light of such factors.
Neither the Company, Vodafone Spain, nor any of their respective associates or
directors, proposed directors, officers or advisers, provides any
representation, assurance or guarantee that the occurrence of the events
expressed or implied in any forward-looking statements in this Announcement
will actually occur or that if any of the events occur, that the effect on the
operations or financial condition of the Company, Vodafone Spain or the
Enlarged Group will be as expressed or implied in such forward-looking
statements. Forward-looking statements contained in this Announcement based on
past trends or activities should not be taken as a representation that such
trends or activities will necessarily continue in the future. In addition,
these statements are based on a number of assumptions that are subject to
change. The forward-looking statements contained in this Announcement speak
only as of the date of this Announcement. The Company, its directors, the
Banks, their respective affiliates and any person acting on its or their
behalf each expressly disclaim any obligation or undertaking to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise, unless required to do so by
applicable law or regulation, the FCA or the London Stock Exchange.

This Announcement refers to "EBITDAaL" and "Cash Flow" as calculated by
Zegona, the calculation of which will differ from the methodology of
calculating EBITDAaL and Cash Flow used by other firms of companies in the
Zegona Group's and Vodafone Spain's industry.

No statement in this Announcement is intended to be a profit forecast or
profit estimate for any period, and no statement in this Announcement should
be interpreted to mean that earnings, earnings per share or income, cash flow
from operations or free cash flow for the Company or Vodafone Spain for the
current or future financial years would necessarily match or exceed the
historical published earnings, earnings per share or income, cash flow from
operations or free cash flow for the Company or Vodafone Spain.

Neither the content of the Company's website nor any website accessible by
hyperlinks on the Company's website is incorporated in, or forms part of, this
Announcement.

This Announcement has been issued by and is the sole responsibility of the
Company. No representation or warranty, express or implied, is or will be made
as to, or in relation to, and no responsibility or liability is or will be
accepted by any of the Banks or by any of their respective affiliates or any
person acting on its or their behalf as to, or in relation to, the accuracy or
completeness of this Announcement or any other written or oral information
made available to or publicly available to any interested party or its
advisers, and any liability therefore is expressly disclaimed.

The contents of this Announcement are not to be construed as legal, business,
financial or tax advice. Each investor or prospective investor should consult
their or its own legal adviser, business adviser, financial adviser or tax
adviser for legal, financial, business or tax advice.

Completion of the Acquisition is subject to the satisfaction (or waiver, where
applicable) of a number of conditions as referenced elsewhere in the
Announcement, Consequently, there can be no certainty that Completion will be
forthcoming.

This Announcement has been prepared for the purposes of complying with
applicable law and regulation in the United Kingdom and the information
disclosed may not be the same as that which would have been disclosed if this
Announcement had been prepared in accordance with the laws and regulations of
any jurisdiction outside the United Kingdom.

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