The board of Ono has given the Spanish cableco’s management the green light to prepare an initial public offering, following a meeting at the company’s Madrid headquarters yesterday.
Ono said its directors did not discuss any proposals to acquire…
The board of Ono has given the Spanish cableco’s management the green light to prepare an initial public offering, following a meeting at the company’s Madrid headquarters yesterday.
Ono said its directors did not discuss any proposals to acquire the company, and TelecomFinance understands that Vodafone’s informal talks to buy the cableco did not lead to a firm offer.
Last weekend Spanish newspaper Expansion reported that Vodafone had tabled a €6.9bn bid for Ono, citing sources close to the process. Liberty Global is also interested in the cableco, according to a January report.
On 13 March, Ono’s investors will meet to formally approve the IPO. No banks have officially been mandated but relationship bank Deutsche Bank is likely to be involved, according to a person familiar with the matter.
Ono has been looking to list for a long time but has been prohibited by the ongoing recession in Spain. A flotation would follow the recent successful IPOs of cablecos Altice and Numericable.
Ono is 54.4%-owned by investment firms Providence Equity Partners, Thomas H. Lee, CCMP and Quadrangle, which invested €1bn into the company in 2005. The rest of its stock is held by other institutional investors.
Vodafone still has options
A telecoms banker suggested that the rejection by Ono’s board should be taken with a pinch of salt. It would not block Vodafone from coming back with an improved offer at any time.
He suggested that the Ono board might want to send a signal to Vodafone to “sharpen their pencil” and come back with a higher offer soon.
A second banker noted that Vodafone risked overpaying at a later stage if it could not agree a deal at this point. The banker referred to KDG, which Vodafone had considered buying prior to the IPO of the German cableco in 2010. Acquiring KDG before the float would have been significantly cheaper for Vodafone than the €7.7bn it paid in 2013 for 76% of KDG shares.
Similarly, it might be cheaper to make a seemingly high offer to buy Ono from its current owners right now, rather than buying out shareholders after a listing at a later stage.
But, the first banker said, waiting for an IPO first before acquiring it would help Vodafone find the true value of the cableco. This might be the preferred way to get hold of the asset if Ono’s expectations are considered too high at this point.
This banker thought Ono was unlikely to sell for a multiple as high as KDG last year, which went for 12x EBITDA.
Bernstein Research analyst John Keith expected Ono to be valued at a minimum of 10x EBITDA, but added that even though it was in line with other cable acquisitions around Europe, it was still hard for Vodafone to justify that kind of multiple.
He said it appeared that Ono’s owners were running a “dual process” and that if they were to pursue an IPO it was likely that they would also achieve a high multiple.
“Most people who would buy [Ono stock] would buy it in the expectation that it gets sold to Vodafone or Liberty eventually anyway,” Keith said.
“I suspect that an IPO would probably include valuation of all the synergies that you would get with [a Vodafone merger], and hence it probably trades at something up around the multiple that [Vodafone] would have to buy it out at.”
Keith said that it could be similar to what happened with Numericable’s IPO, which he said priced in the expectation of synergies with an SFR merger; a deal he thinks is pretty likely to happen.
