Iliad he tries again. The French telephone company has officially presented a proposal for the Italian assets of Vodafone. This time, however, Iliad points not at the purchase but to the creation of a joint venture with Vodafone to combine the Italian activities of the two companies.
In a press release, the French group announced that it had put it on the table 8,5 billion euros to Vodafone (valued at 10,45 billion) to create the merger between the two and create a NewCo with shares at 50%.
Iliad, already last year, had come forward to take over 100% of Vodafone's assets but the offer of over 11 billion was rejected by the British group.
Iliad-Vodafone: NewCo 50% of activities in Italy
Iliad, we read in the note of the proposal, “values Vodafone Italia at 10,45 billion euros (Enterprise Value, EV). Vodafone would obtain 50% of the share capital of NewCo, together with a cash payment of 6,5 billion of euros and to a shareholder financing for 2,0 billion euro aimed at ensuring long-term alignment".
The evaluation of the operation proposed by Iliad for Vodafone Italia yes based on EBITDAaL estimated of the latter, which amounts to 1,34 billion euros for financial year 2024 as per broker consensus. In terms of EBITDAaL multiple, the deal implies a value of 7,8x, higher than the 7,1x multiple offered by Iliad in its previous offering of €11,25 billion in February 2022.
La new entity combined would generate a turnover of approximately 5,8 billion euros and an EBITDAaL of approximately 1,6 billion euros for the financial year ending in March 2024. Furthermore, annual synergies of over 600 million euros are expected in Opex (operating expenses) and Capex (investment expenses).
The new company, with the distribution of shares equally at 50%, would follow a process similar to that of the merger between Wind and 3 Italia which led to the formation of WindTre.
For Iliad right of purchase option for 10% each year
As part of the proposal, Iliad would have a right of option (call option) on Vodafone's participation in the new company, allowing for acquire 10% of the share capital annually of NewCo at a price per share equivalent to the equity value at the time of closing of the transaction.
If this option is exercised, an additional 1,95 billion would be generated euros of liquidity for Vodafone. The financing of the operation is supported by important international credit institutions.
Check the Italian market
The objective of the merger between Iliad and Vodafone in Italy it is create a unique operator with a strong market presence, focused on innovation (especially on fiber optics) and quality customer service.
The proposal includes an innovative approach by Iliad on connectivity, accessibility and digital inclusiveness, supported by Vodafone's experience in the B2B sector.
The possible consolidation in the Italian telecommunications market thus begins with this proposal which represents the first significant step in a context which currently hosts five large mobile network operators (TIM, Vodafone Italia, Wind Tre, Iliad and Fastweb), as well as numerous virtual operators, including the largest, Poste Italiane, and ten fixed broadband providers.
The union of the skills of the two companies would make NewCo a protagonist of the Italian telecommunications market.
And now Swisscom?
Vodafone has not been doing well in Italy for some time. Last month the CEO of the group, Margaret of the Valley, under pressure to improve profitability, had indicated that the British group was examining the options for its business in Italy, the last of three troubled European markets that, in its opinion, needed solutions.
And the option (or rather the rumour) that was circulating in this period was another, namely the interest of Swisscom. In fact, there was talk of one possible acquisition of Vodafone's business in Italy by the Swiss company (which operates in our country through Fastweb).
The union between Swisscom and Vodafone is a discussion that has been going on for several years, with periodic returns. In the past, Vodafone had expressed interest in acquiring the Swiss company, when it was pursuing a strategy focused on acquiring broadband networks to accelerate the convergence between fixed and mobile services. Now, however, the time seemed to have come for the Swiss company to take over the activities. For now everything remains in the pipeline, awaiting developments.
While waiting for Swisscom's moves, Iliad thus played in advance by presenting the offer. The proposal, however, does not necessarily come to fruition. Already, in the past, in February 2022, the French group had put forward a proposal which was returned to the sender. In today's press release, this previous proposal is mentioned, underlining how the current offer is more advantageous for Vodafone, considering the current market conditions. Meanwhile, Xavier Niel, founder and majority owner of Iliad, has acquired a 2,5% stake in Vodafone through an investment vehicle.
Vodafone's response
Vodafone takes note of Iliad's proposal, but also recalls that other negotiations are underway. Here is the text of the communication released by the group:
“Vodafone Group Plc (“Vodafone”) takes note of today's announcement by Iliad relating to the proposed merger between Vodafone Italia and Iliad Italia.
Consistent with its previous statements, Vodafone is in favor of market consolidation in countries where it is unable to obtain an adequate return on invested capital and confirms that it is exploring options with different parties to achieve this objective in Italy, including through a merger or a transfer.
There is no certainty that a settlement will ultimately be agreed. If necessary, a further announcement will be made when appropriate."
The Vodafone group press release
Article updated on December 18, 2023 at 11:55 am
