Vodafone has announced that it entered into binding agreements with Zegona concerning the sale of 100% of Vodafone Holdings Europe, S.L.U.
On completion, Vodafone’s consideration will comprise at least €4.1 billion in cash and up to €0.9 billion in the form of redeemable preference shares (RPS) which redeem, for an amount comprising the subscription price and accrued preferential dividend, no later than six years after closing.
“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,” said Margherita Della Valle, a chief executive officer of Vodafone. “The market has been challenging with structurally low returns. My priority is to create value through growth and improved returns. Following the recently announced transaction in the UK, Spain is the second of our larger markets in Europe where we are taking action to improve the Group’s competitiveness and growth prospects.”
Summary of Transaction Terms
Zegona has fully committed debt facilities of up to €4.2 billion available to satisfy the cash consideration and intends to raise equity via an institutional placing of new Zegona shares to investors before the completion of the transaction, subject to market conditions.
The RPS will be issued to Vodafone by a newly created entity, EJLSHM Funding Limited (FinCo). FinCo will subscribe for new ordinary shares in Zegona for an amount, based on the issue price for Zegona’s intended equity raise, that is equivalent to the amount of RPS being subscribed for by Vodafone. The shares held by FinCo will rank in an equal step with Zegona’s existing ordinary shares and the ordinary shares to be issued according to the equity raise.
At FinCo’s option, the RPS may pay cash or accrue a compounding dividend, at a fixed rate of 5% for each of the first 3 years, a step up to 10% in year 4, a step up to 12.5% in year 5 and 15% thereafter. FinCo will irrevocably undertake not to exercise its voting rights in Zegona (other than about a takeover of Zegona). FinCo’s sole purpose will be to redeem the RPS and it is intended that the RPS will be redeemed 6 years after completion, or earlier following a material liquidity event or exit for Zegona that releases funds to its shareholders.
Completion of the transaction is conditional on certain approvals being obtained from current Zegona shareholders as well as regulatory clearances and is expected to take place in the first half of 2024. The transaction is not subject to any minimum equity raise by Zegona.
Vodafone and Zegona will enter into a brand licence agreement, which permits the use of the Vodafone brand in Spain for up to 10 years post-completion. Vodafone and Zegona will enter into other transitional and long-term arrangements for services, including access to procurement, IoT, roaming, and carrier services.
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