Vodafone to sell Spanish business to Zegona for up to €5bn

Vodafone Group (LSE: VOD) and Zegona Communications unveiled a landmark deal on Tuesday, with Zegona set to acquire Vodafone Spain at an enterprise value of €5.0 billion. The telecommunications giant Vodafone and communication and entertainment-focused Zegona finalised the transaction, with Zegona agreeing to pay a substantial sum of ‘at least’ €4.1 billion in cash and an additional €900 million in redeemable preference shares.

Vodafone’s Chief Executive, Margherita Della Valle, hailed the deal as a pivotal step, saying, “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.”

Under the agreement, Vodafone and Zegona will also enter into a brand license deal allowing the continued use of the Vodafone brand in Spain for up to a decade post-completion. The companies will establish various transitional and long-term arrangements, including services related to procurement, internet of things, roaming, and carrier services.

Zegona plans to finance this significant acquisition through a combination of new debt, Vodafone financing, and a new equity raise. The communication and entertainment company will raise up to €600 million from the sale of new shares before completion, engaging third-party investors, and taking on new debt. Zegona has secured committed debt financing of €4.2 billion and a committed revolving credit facility of €500 million.

Zegona, led by former Virgin Media executives and known for their successful turnarounds at Telecable and Euskaltel, expressed enthusiasm about re-entering the Spanish telecoms market. “We are very excited about the opportunity to return to the Spanish telecoms market. This financially attractive acquisition marks our third deal in Spain after successful turnarounds at Telecable and Euskaltel,” stated Zegona Chair & CEO Eamonn O’Hare.

The transaction, subject to approval by Zegona shareholders and regulatory clearances, is expected to conclude in the first half of 2024. Vodafone’s shares saw a 0.9% decline, reaching 76.00 pence each at 10:00 GMT, while Zegona’s shares remained untraded at 30.40p each.