Vodafone shares surge on Iliad's Italian merger proposal

Shares in Vodafone (LSE: VOD) jumped 6.7% on Monday morning after French telecoms firm Iliad submitted a new proposal to merge its Italian operations with those of the British mobile giant.

The proposed 50-50 joint venture would combine Iliad’s fast-growing 6-year old consumer business with Vodafone Italy’s strength in the business segment. The combined entity is projected to generate 5.8 billion euros in annual revenues.

Iliad’s latest offer includes a 6.5 billion euro cash payment to Vodafone. This comes after Vodafone rebuffed Iliad’s 11.25 billion euro outright takeover bid last year for its Italian unit.

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The new proposal is said to value Vodafone Italy at a higher 7.8 times earnings multiple versus 7.1 times previously. It could also fend off competition from a rival bid under consideration from Swisscom’s Fastweb.

Vodafone shares have fallen 19% year-to-date amid broader market weakness.