Vodafone share price rises as Iliad invites it to merge Italian operations
Iliad said on Monday it had submitted a proposal to Vodafone to merge their Italian businesses, adding the project had the unanimous support of its board of directors.
“The merged business would be expected to generate revenues of around £5bn and EBITDA of approximately £1.38bn (€1.6bn) for financial year ending March 2024,” Iliad said in a statement.
Following the statement, Vodafone’s share price went to the top of FTSE 100, up by more than 6.2 per cent after the open, to 67.75p.
Under the plan, Vodafone would receive 50 per cent of the share capital of the newly merged business, together with a cash payment of €6.5bn and a shareholder loan of €2bn to ensure long-term alignment, Iliad added.
Vodafone said last month it was reviewing options for its Italian operation, the last of three troubled European markets its boss had vowed to fix.
Iliad offered €11.25bn to buy Vodafone Italy outright last year but was rebuffed.
It said its new joint-venture proposal, which Reuters reported on Friday, implied an earnings multiple of 7.8 times, which was higher than the 7.1 times multiple offered last year.
Vodafone is also evaluating a potential combination of its assets with those of Swisscom’s Italian unit Fastweb, according to recent reports.
Vodafone’s shares rose 4.3 per cent in early deals on Monday.
Vodafone Group said in a statement it “notes today’s announcement from Iliad regarding a proposed merger of Vodafone Italy and Iliad Italy.
“Consistent with its previous statements, Vodafone is supportive of in-market consolidation in countries where it is not achieving appropriate returns on invested capital and confirms it is exploring options with several parties to achieve this in Italy, including through a merger or a disposal.
“There can be no certainty that any transaction will ultimately be agreed. If required, a further announcement will be made when appropriate.”
It comes as Vodafone is currently trying to turnaround three of its struggling businesses.
This latest move is in line with Vodafone group’s strategy to focus on its core growth areas.
Earlier this year the telco giant flagged Italy as one of three European markets where structural changes were needed, along with Spain and the UK.
Now, things are starting to look like a different Vodafone under new chief executive Margherita Della Valle, according to Paolo Pescatore, founder of PP Foresight.
“There are few strategic options left in the so called big European mobile markets,” he told City PM, “You can’t rule out any options including a takeover, merger with any of the players.
“The progress Iliad has made in the cut throat Italian market is nothing less than stellar. A disruptive punchy move which is a lesson for all new entrants.
“Consolidation remains a hot theme in a challenging European market which offers a route to compete at scale given that margins are being squeezed,” he added.
In October, Vodafone sold its Spanish business to London-based but European-focussed outfit Zegona for £3.6bn along with around £750m worth of preferential shares.
The company is currently trying to get a merger with Three UK past the competition watchdog, with a decision expected late next year.
Reuters – Benoit Van Overstraeten and Paul Sandle
Additional reporting by Jess Jones