Vodafone Group Plc is close to selling at least a 50% stake in its Spanish telecommunications company to Zegona Communications Plc in a deal that values the Spanish unit at more than 5 billion euros ($5.3 billion), according to people. Informed about the matter.
These people said that the two companies are finalizing the details of the deal, and may announce its completion in the coming days.
They noted that the bid by Zigona, a London-based buyout firm, outperformed others submitted including that of private equity investment firm RRJ Capital.
Although discussions have entered an advanced stage, the deal could still be postponed or even cancelled, according to people familiar with the matter. Vodafone did not immediately respond to a request for comment outside normal business hours. For his part, a Zigona spokesman repeated the details of a statement issued last September 22, when the company confirmed the existence of talks with Vodafone, and said that it was discussing financing with the banks working with it.
Vodafone, based in Newbury, England, has been trying to close a deal in Spain for more than a year. Former CEO Nick Read said the market needed to integrate, but ultimately the market showed little interest, while the company's competitors agreed to merge. After years of falling profits, Reid's replacement, Margherita Della Valle, demoted the unit to a so-called group of European companies smaller than Vodafone and placed it under strategic review.
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Acquisition interests
British Telecom is working with a consultant to evaluate options for its Spanish business unit, Bloomberg News reported last July. Warburg Pincus was among those considering a bid for the unit, while Apollo Global Management Inc. also showed initial interest, people familiar with the matter previously said.
Vodafone said last September that it was in talks with Zigona about a possible deal to acquire the Spanish unit.
Bloomberg News reported last week that a consortium led by buyout firm RRJ Capital run by Richard Ong, a former Goldman Sachs Group banker, is considering a bid for the unit's assets as well.
Conditional mergers
Spain's telecommunications market, already one of Europe's most competitive, is expected to undergo a major transformation in the coming months. In this regard, Orange SA and Masmovil Ibercom SA are awaiting obtaining a regulatory license to complete a merger in a deal that will create the largest telecommunications company in Spain, larger than Telefonica SA.
This comes as the European Commission seeks to impose strict conditions on mergers, which may force both Orange and Massovil to sell certain assets to a smaller competitor. The decision in this regard will be taken as evidence of the Commission's readiness to allow mergers in this sector.
Zigona describes itself as operating on a buy, fix, sell strategy, and has already played a key role in consolidating the sector in Spain. The company was founded in 2015 and is run by Eamonn O'Hare, a former executive at Virgin Media Ltd, which bought Spanish telecom operator Euskaltel SA and sold it to Massovil Ebercom, in a deal that reduced the number of competing parties in this market from five to Four companies.
