iliad submits merger proposal to Vodafone Italy
December 19, 2023
The iliad Group, the France-based telco, has confirmed that it has submitted a proposal to Vodafone Group for the merger of iliad’s and Vodafone’s businesses in Italy through the creation of a new entity (‘NewCo’) which it says will “establish an attractive market offering centred around innovation, growth and unparalleled customer experience”. This offer benefits from the unanimous support of iliad’s board of directors and its main shareholder Xavier Niel.
The proposed merger would create an innovative challenger in the Italian market with five mobile network operators and more than 10 fixed broadband providers.
iliad says its proposed enterprise value for Vodafone Italia of €10.45 billion would represent a significant premium in terms of EBITDAaL multiple reflecting the strong potential for NewCo as a strong telecoms player in the Italian markets following a merger:
- Based on Vodafone Italia’s estimated EBITDAaL of €1.34 billion for FY2024 (as per broker consensus), the proposed transaction implies an EBITDAaL multiple of 7.8x, i.e. more than the 7.1x EBITDAaL multiple offered by iliad in its €11.25 billion offer in February 2022
- Assuming €300 million of intercompany and other charges below EBITDAaL using similar charges/revenues ratio as in the Zegona/Vodafone Spain publicly disclosed information, the adjusted EBITDAaL multiple would be 10x.
As part of the proposed transaction, iliad would have a call option on Vodafone’s equity stake in NewCo and would be able to acquire a block of 10 per cent of the NewCo share capital every year at a price per share equal to the equity value at closing. In the event iliad would choose to exercise the call options in full, this would generate an additional €1.95 billion in cash for Vodafone.
The merged business would be expected to generate revenues of c€5.8 billion and EBITDAaL of approximatively €1.6 billion for financial year ending March 2024 It would also benefit from expected annual run rate synergies of more than €600 million in Opex + Capex. Upon closing of the proposed merger, leverage would stand at 4.5x net debt to EBITDAaL, with the objective to reduce to below 3x three years post-closing, according to iliad, citing information based on public sources.
Thomas Reynaud, iliad Group CEO, said: “The market context in Italy calls for the creation of the most innovative telecom challenger, with ability to compete and create value in a competitive environment. We believe that the profiles and complementary expertise of iliad and Vodafone in Italy would allow us to build a strong operator with the ability and financial strength to invest for the long term. NewCo would be fully committed to accelerating the country’s digital transformation and especially fibre adoption and 5G deployment, with more than €4 billon of investment planned over the next five years.”