Vodafone (NASDAQ: VOD) has agreed to sell its Spanish business to U.K.-based Zegona Communications in a deal worth up to $5.3 billion. Once the deal closes, Vodafone will receive about $4.4 billion in cash and up to $960 million in the form of redeemable preference shares, according to the companies.
The British telecom giant said Zegona has fully committed debt facilities of up to $4.5 billion to satisfy the cash consideration and intends to raise equity via an institutional placing of new Zegona shares. The enterprise value of the transaction is equivalent to a multiple of 5.3x Adjusted EBITDAaL for the 12-month period that ended March 31,2023.
“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,” Margherita Della Valle, Vodafone Chief Executive, said in a statement.
Under an agreement with Zegona, Vodafone will provide certain services to Vodafone Holdings Europe (Vodafone Spain) for a total annual service charge of $117 million. The companies will also sign a brand license agreement that allows the use of the Vodafone brand in Spain for up to 10 years after the transaction is completed.
The deal, which is subject to approval from Zegona shareholders and regulatory clearances, is expected to close in the first half of 2024.
Vodafone has been trying to reorganize its business. In June, the company announced that it was merging its U.K. telecommunication businesses, Vodafone UK with CK Hutchison’s Three UK to create the country’s largest mobile operator, Inside Towers reported. Subsequently, the British antitrust watchdog, in early October, asked for market feedback on the impact the merger would have on wireless competition in the country.
Separately, the Spanish government is thinking of acquiring a stake in Telefónica (NYSE: TEF) following Saudi Telecom’s plan to become the Spanish telecommunications carrier’s largest shareholder. The Spanish sovereign fund SEPI has not made a final decision yet.
Last month, Saudi Arabia’s STC Group acquired a 9.9 percent stake in Telefónica for about $2.2 billion, Inside Towers reported. The Spanish government has been analyzing that deal and required STC, which is financed by the Saudi sovereign wealth fund PIF, to get special approval for such a large holding since Telefonica also supplies Spain’s military and defense ministry.
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