French incumbent Orange has made a €3.4bn (US$4.4bn) bid for Spanish fixed-line operator Jazztel in an effort to bolster its position in the highly-competitive local market.
Orange announced today that it will offer €13 per share in cash for 100% of…
French incumbent Orange has made a €3.4bn (US$4.4bn) bid for Spanish fixed-line operator Jazztel in an effort to bolster its position in the highly-competitive local market.
Orange announced today that it will offer €13 per share in cash for 100% of Jazztel shares, representing a 34% premium on the volume-weighted average closing price over the past 30 trading days.
The offer values Madrid-listed Jazztel at 8.6 times its projected 2015 EBITDA, taking expected synergies into account, the Paris-based company said.
Orange, which owns Spain’s third-largest mobile operator, estimates the combined entity will generate up to €1.3bn in global synergies, largely due to savings in operational expenditure and network investments.
The offer is conditional upon at least 50.01% of Jazztel shareholders tendering their shares.
Jazztel chairman Leopoldo Fernandez Pujals has agreed to sell his 14.48% stake and other company directors, including CEO Jose Miguel Garcia Fernandez and general secretary Jose Ortiz Martinez, will also take part in the tender.
Orange said it will finance the acquisition by issuing up to €2bn of securities, giving access to its shares, and subordinated hybrid bonds.
“The equity credit of such a financing package, as granted by rating agencies, is planned to equal the total consideration eventually paid to Jazztel shareholders.”
The French telco noted that, given the strength of its balance sheet, the offer is not conditional upon obtaining financing.
However, it is subject to the approval of relevant authorities, including the Spanish Securities Commission (CNMV) and the UK Takeover Panel. The latter will review the deal as Jazztel has its registered office in the UK.
Orange CEO Stephane Richard was quoted on a conference call with analysts as saying he expects the deal to be subject to only a ‘phase I’ competition review.
The company expects the deal to close in the first half of 2015.
Bank of America Merrill Lynch advised Orange on the transaction, Reuters reported.
Number two player
Orange said the deal will create the second-largest fixed-line broadband operator in Spain, as well as a “dynamic” mobile player, pushing customers towards convergent offers.
“In an economic context that has continued to recover, this operation will enable Orange to accelerate its growth in a highly-competitive market.”
Spain’s largest mobile operators are Telefonica’s Movistar and Vodafone. TeliaSonera-controlled Yoigo is the fourth player behind Orange.
IHS Technology senior analyst James Allison noted that an Orange Spain-Jazztel merger would create an operator with a 25% share of the Spanish broadband market.
“The acquisition of Jazztel would add 2.2 million homes passed with fibre-to-the-home technology,” he said in a note to investors, adding that it would also give Orange an extra 1.5 million MVNO customers.
In Allison’s view, the offer is partly a response to Vodafone’s recent expansion in Spain with its acquisition of cableco Ono for €7.2bn.
As a result of the offer, Jazztel will pull out of talks with TeliaSonera to buy Yoigo. The Spanish and Swedish telcos confirmed earlier this month that negotiations were underway and a Bloomberg report claimed Jazztel could offer €500m (US$646m) for the asset.
However, Richard said on today’s call with analysts that the company does not need to acquire Yoigo and will focus on combining its Spanish unit with Jazztel, Reuters reported. That said, Richard added that the company supports consolidation in general and will consider playing a role at a later stage if it is able to.
For the past few months, Orange has repeatedly said it was interested in playing an active role in Spain via acquisitions. In early September, Federico Colom, finance director for the Spanish unit, was quoted as saying that if either Yoigo or Jazztel came up for sale, the company would take part in the bidding process.
