The integration of the Italian activities of iliad and Vodafone aims to create the most innovative challenger telecommunications operator in Italy. Vodafone Italia valued at 10.45 billion euros: Vodafone would receive 8.5 billion euros in cash and shareholder financing
This morning the iliad Group presented the Vodafone Group with a proposal for a merger between iliad Italia and Vodafone Italia.
UPDATE: the official press release with the first reaction from Vodafone
The numbers
The proposal evaluates Vodafone Italy 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 euros and a shareholder loan of 2.0 billion euros aimed at ensuring long-term alignment. L’equity value of Vodafone’s participation in NewCo al closing it is valued at 1.95 billion euros.
iliad Italia valued at 4.45 billion euros (EV). iliad would obtain 50% of the share capital of NewCo, together with a cash payment of 500 million euros and a shareholder loan of 2.0 billion euros.
The offer
The iliad Group announces today that it has presented to the Vodafone Group a proposal to merge the activities of iliad and Vodafone in Italy, through the establishment of a new company (“NewCo”) with the aim of developing an attractive market offering, based on innovation, growth and an unparalleled customer experience. The offer has the unanimous support of iliad’s board of directors and its main shareholder, Xavier Niel.
All information relating to Vodafone and Vodafone Italia is based on publicly available data.
Potential creation of the most innovative telecommunications challenger operator in Italy
Thanks to the union of skills and talents of iliad and Vodafone, NewCo would become the protagonist on the Italian telecommunications market for investments in cutting-edge technologies and solutions customer-centricsupporting and accelerating the country’s digital transition and in particular the adoption of fiber optics.
The combined entity would benefit in particular from iliad’s innovative approach to digital connectivity, accessibility and inclusiveness, together with Vodafone’s B2B expertise.
The proposed merger would create the most innovative operator in an Italian market with 5 mobile network operators and over 10 fixed broadband providers.
The offer of business combination constitutes a highly attractive proposition for Vodafone stakeholders
L’enterprise value proposed by iliad for Vodafone Italia, equal to 10.45 billion euros, would represent a significant premium in terms of EBITDAaL multiple, reflecting NewCo’s high potential as a primary telecommunications operator on the Italian market following the merger:
Based on Vodafone Italia’s estimated EBITDAaL of €1.34 billion for fiscal 2024 (as per broker consensus), the proposed transaction implies an EBITDAaL multiple of 7.8x, higher than the EBITDAaL multiple of 7.1x offered by iliad in its offer of 11.25 billion euros in February 2022. Assuming 300 million euros of intercompany charges and further charges below EBITDAaL, using an expense/income ratio similar to that obtainable from the publicly available data relating to the Zegona/Vodafone Spain transaction, the adjusted EBITDAaL multiple would be 10x.
The proposal recognizes the value and liquidity of Vodafone. The deal would also fulfill Vodafone’s publicly stated objective of transforming and simplifying the group.
As part of the proposed transaction, iliad would have a call option on Vodafone’s stake in NewCo with the right to acquire 10% of the share capital of NewCo every year at a price per share equal to all’equity value al closing. Should iliad decide to fully exercise the call options, this would generate an additional €1.95 billion of liquidity for Vodafone.
The financing of the operation is supported by leading international banks.
The proposal aims to create a strong operator with a solid financial profile
The combined entity would generate revenue of approximately €5.8 billion and EBITDAaL of approximately €1.6 billion for the financial year ending March 2020. Furthermore, it would benefit from expected annual synergies of over €600 million in Opex + Capex.
At the closing of the proposed merger, leverage would be at 4.5x net debt to EBITDAaL, with the goal of falling below 3x three years after closing.
Thomas ReynaudCEO of the iliad Group, said: “The market context in Italy requires the creation of the most innovative telecommunications challenger operator, with the ability to compete and create value in a competitive environment. We believe that the complementary profiles and skills of iliad and Vodafone in Italy would allow us to build a strong operator with the capacity and financial strength necessary to invest in the long term. The NewCo would be fully committed to accelerating the country’s digital transition and in particular in the adoption of fiber optics and the development of 5G, with over 4 billion euros of investments expected in the next 5 years”.