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Zegona withdraws Euskaltel tender offer

December 27, 2018

London-based investment house Zegona Communications is not proceeding with its partial tender offer to acquire up to a maximum of 14.9 per cent of the outstanding share capital of Spanish convergent operator Euskaltel at a price of €7.75 per share, citing a deterioration in equity market conditions since announcing its intention on October 19th.

Since then, Zegona has continued the process to secure funding for its proposed offer. However, given the deterioration in equity market conditions during this period, the terms available for the transaction to acquire the full 14.9 per cent of Euskaltel would not have been acceptable to Zegona shareholders. Zegona therefore no longer intends to proceed with its proposed Tender Offer.

Zegona has agreed terms for a shareholder relationship with Talomon Capital Limited, which is a shareholder of both Zegona and Euskaltel. This increases Zegona’s confidence in its ability to engage positively with Euskaltel with materially increased influence.

Under the shareholder relationship agreement, Talomon would have an ownership entitlement of up to 2.4 per cent of Euskaltel. Therefore, given Zegona’s existing 15 per cent ownership of Euskaltel, in order to avoid potentially triggering a mandatory offer, Zegona believes it will be limited to acquiring a maximum of an additional 12.5 per cent of Euskaltel.

Zegona’s strategy in relation to Euskaltel remains focused on increasing its ownership position and using its increased influence to work constructively with the Euskaltel board of directors and management to improve the performance of the business. Zegona will therefore seek to increase its ownership of Euskaltel through market purchases at a price it considers attractive for its shareholders based on prevailing market conditions.

Following good support from existing and new investors, Zegona intends to raise new equity for these proposed market purchases via a non pre-emptive institutional placing. In addition, Zegona has been offered flexible loan financing facilities, subject to certain conditions, that could be used to increase Zegona’s investment in Euskaltel.

Zegona intends to publish a circular and prospectus for its equity placing in January 2019. Talomon owns between 1 per cent and 2 per cent of Euskaltel’s share capital on behalf of its clients and funds it manages two Financing facilities in an aggregate amount of £30 million, with up to £10 million available from the Virgin Group.

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