- Vodafone receives 4.1 billion euros in cash
- The second major deal for CEO Della Valle
- Zigona to finance a deal worth €4.2 billion of new debt
- Shares open at 1.3%.
LONDON, Oct 31 (Reuters) – Vodafone (VOD.L) will sell its Spanish business to Zegona Communications (ZEG.L) for 5 billion euros ($5.30 billion) in the second major deal by its new chief executive to revamp a company struggling for development. Little growth in mature markets.
Vodafone CEO Margherita Della Valle, who has pledged to reshape the British telecoms group to make it more profitable, said the sale would enable it to focus its resources in markets with “sustainable structures and sufficient local scale”.
Vodafone said it would receive at least 4.1 billion euros in cash. It will also provide financing of €900 million in the form of preferred shares redeemable no later than six years after closing.
Vodafone shares opened 1.3% higher following news of the Spanish disposal.
Since her appointment as permanent CEO in April, Della Valle has focused on improving Vodafone’s performance. Although it is still one of the largest telecommunications companies in the world, with a presence across Europe and Africa, it is struggling to grow.
It announced the long-awaited £15 billion ($19 billion) merger of Vodafone’s UK mobile operations with those of CK Hutchison (0001.HK) in June, a deal aimed at creating a new market leader to drive competition and investment. In Britain.
The Spanish deal represents the latest part of the company’s asset simplification plan after shares fell to 20-year lows earlier this year, and comes on the heels of Della Valle’s announcement in May of 11,000 job cuts.
British company Zigona, which has previously bought and sold telecom assets in Spain, said it would finance the deal through new debt worth 4.2 billion euros, financing from Vodafone and an equity increase of up to 600 million euros.
Vodafone ranks third in Spanish telecommunications after Telefonica and Orange. The latter teams up with the fourth largest player MasMovil.
Vodafone has struggled to grow in the highly competitive Spanish market, and Della Valle launched a strategic review of the Spanish unit earlier this year.
Zegona Chairman and CEO Eamonn O’Hare said he was “very excited” about the opportunity to return to the Spanish telcos
“This financially attractive acquisition represents our third deal in Spain following the successful transformations of Telecable and Euskaltel,” he said.
“With our clearly defined strategy and proven track record, we are confident in our ability to create significant shareholder value.”
($1 = 0.9427 euros)
(Additional reporting by Yadarissa Chapong in Bengaluru and Sarah Young in London – Preparing by Mohammed for the Arabic Bulletin) Editing by Subhranshu Sahoo, Kate Holton and Susan Fenton
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