Key highlights
- 50-50 joint venture to create a
national unified communications provider in the Netherlands with
complementary strengths across video, broadband, mobile and B2B
services.
- Combining Ziggo’s fiber-rich
broadband network with Vodafone’s leading mobile operations
will create a stronger fixed and mobile competitor in the Dutch
market, delivering significant benefits for consumers, businesses
and the public sector through investment in digital infrastructure
and customer experience.
- Total cost, capex and revenue
synergies with an estimated net present value of approximately €3.5
billion after integration costs.
- Total synergies include cost and
capex synergies with run-rate savings of €280 million1
on an annual basis by the fifth full year post closing, equivalent
to a net present value of approximately €2.5 billion after
integration costs.
- Based upon the enterprise value of each
business, and after deducting Ziggo’s €7.3 billion of net debt2,
Vodafone will make a cash payment to Liberty Global of €1
billion to equalize ownership in the joint venture. Vodafone
Netherlands will be contributed on a debt and cash free basis.
- New joint venture will target
leverage of 4.5-5.0x covenant EBITDA3. Accordingly,
additional financing is expected to be raised by the joint venture
in the future to reach target leverage. Proceeds from the financing
will be distributed equally between Vodafone and Liberty
Global.
- The transaction is expected to close
around the end of 2016 and is subject to regulatory approvals
and consultations with the Works Councils.
Vodafone Group Chief Executive, Vittorio Colao, said, “The
combination of Vodafone’s leading mobile business with Ziggo’s
successful broadband and TV business creates a strong and
competitive integrated communications player, which will invest in
digital infrastructure, entertainment services and productivity
applications for Dutch consumer, business and public sector
customers. Together we will be a stronger competitor in the
Netherlands, benefiting customers of both companies and the market
as a whole. This transaction marks a continuation of Vodafone’s
market-by-market convergence strategy and we look forward to
partnering with Liberty Global to create a fully integrated
provider in one of our core European markets.”
Mike Fries, Chief Executive Officer of Liberty Global, said,
“This powerful combination of the best fixed and mobile networks in
the Netherlands will deliver huge benefits to Dutch consumers and
businesses. Throughout Europe, Liberty is capitalizing on the
rising demand for lightning-fast broadband speeds, the coolest
digital TV platforms and apps, and seamless 4G wireless
connectivity. Soon, both Ziggo and Vodafone customers in the
Netherlands will be at the forefront of this new world, and we
couldn't be more excited about our partnership with Vodafone. We
look forward to working together to develop cutting-edge converged
services for the Dutch market.”
Strategic Combination
Liberty Global plc (NASDAQ: LBTYA, LBTYB, LBTYK, LILA and LILAK)
and Vodafone Group Plc (LSE: VOD) today announced that Liberty
Global Europe Holding B.V. and Vodafone International Holdings B.V.
have reached an agreement to merge their operating businesses in
the Netherlands to form a 50:50 joint venture (the “JV”). The JV
will operate under both the Vodafone and Ziggo brands and will
create a nationwide integrated communications provider with over 15
million revenue generating units, of which 4.2 million are video,
3.2 million are high-speed broadband, 2.6 million are fixed-line
telephony and 5.3 million are mobile4.
By combining Ziggo’s market-leading Horizon TV product suite,
200 Mbps nationwide broadband internet and extensive Wi-Fi network,
together with Vodafone’s market-leading, data-rich 4G mobile
propositions, Dutch consumers will enjoy a high-quality customer
experience with superior connectivity and entertainment both in and
outside the home.
In addition, the JV will become a leading national enterprise
business through the combination of Vodafone’s B2B expertise,
product portfolio and strong distribution footprint together with
Ziggo’s B2B operations and its high-capacity nationwide cable
network. This will ensure sustainable competition in the small,
medium and large business segments across the Netherlands, which
will benefit the overall Dutch economy.
Financial Profile of the Joint Venture5
Vodafone and Liberty Global will ensure that the JV will benefit
from the scale benefits and complementary expertise of each
partner. The parties have agreed to provide a suite of services to
the JV post completion. These services principally comprise IT and
technology-related services, procurement, brand management and
other support services. The annual charges to the JV will depend on
the actual level of services required by the JV.
Financial information for Ziggo and Vodafone Netherlands is
presented below for the 12 months ended December 31, 2015.
€m; December 31, 2015
Ziggo6
€m; December 31, 2015
VodafoneNetherlands
Revenue 2015 2,484
Revenue 2015 1,929
OCF 20157
1,352
EBITDA 20158
643
EstimatedShareholder Recharges9
(81) Estimated
IncrementalShareholder Recharges9 (48) OCF
2015 After Estimated
Shareholder Recharges
1,272
EBITDA 2015 After IncrementalShareholder
Recharges
595 Property & Equipment Additions 2015
(484) Capital Additions
2015 (338)
Transaction Details
Based upon the enterprise value of each business, and after
deducting Ziggo’s €7.3 billion of net debt2, Vodafone will make a
cash payment to Liberty Global of €1 billion to equalize ownership
in the JV, reflecting the €2 billion difference in the two
companies’ equity value. Vodafone Netherlands will be contributed
to the JV on a debt and cash free basis.
The JV will target a leverage ratio of 4.5-5.0x covenant3
EBITDA. Accordingly, the JV is expected to raise new debt financing
in the future to reach its target leverage ratio, with proceeds to
be distributed equally between Liberty Global and Vodafone. The
transaction will not trigger a change of control under Ziggo’s
existing third-party debt.
The JV intends to distribute 100% of its available cash to the
shareholders and is expected to undertake periodic further
recapitalizations, subject to market and operating conditions, to
maintain its 4.5-5.0x target leverage ratio. Between signing and
closing, each party will retain the free cash flow of their
respective operations. Liberty Global will contribute an estimated
€321 million10 of Ziggo net operating losses to the JV at closing
and retain ownership of the remaining €2.9 billion11 of its other
Dutch net operating losses.
Following completion of the transaction, neither Vodafone nor
Liberty Global will consolidate the JV. After closing, Liberty
Global’s 50% interest in the JV will be attributed to the Liberty
Global Group, which is primarily comprised of Liberty Global’s
European operations.
The transaction is expected to be enhancing to Vodafone’s free
cash flow per share from the second full year post completion.
Synergy Opportunity
The JV is expected to generate significant efficiencies, with
run-rate cost and capex synergies of €280 million1 on an annual
basis by the fifth full year post closing, equivalent to a net
present value of approximately €2.5 billion after integration
costs.
The key expected sources of cost and capex synergies
include:
- Use of existing infrastructure to
provide services for each entity’s customers at lower cost compared
to standalone / wholesale capabilities;
- Combination of regional and national
network infrastructures and IT systems;
- Reduction in combined marketing
expenditures;
- Potential to reduce general and
administration costs; and
- Site rationalization.
To achieve these synergies, the JV expects to incur
approximately €350 million of integration costs, most of which will
be incurred in the first three years post completion.
The JV will have a significant opportunity to provide Ziggo’s
triple-play services to Vodafone Netherlands’ existing mobile
consumers and enterprise customers and to provide Vodafone
Netherlands’ mobile services to Ziggo’s existing residential and
business customers. The JV will also benefit from Vodafone’s and
Liberty Global’s collective global scale and technical expertise
and will offer customers a wide range of products, content and
services that draw on each company’s products and networks, greatly
enhancing choice and competition in the Dutch market. It is
expected that the JV will generate revenue synergies from these
areas with a net present value of €1 billion.
Inclusive of revenue synergies, the total expected synergies
have an estimated net present value of approximately €3.5 billion
after integration costs.
The estimated synergies mentioned above are incremental to the
unrealized portion of the synergies announced by Liberty Global
from the combination of Ziggo and UPC Netherlands.
Management, Governance and Exit
The Supervisory Board of the JV is expected to be comprised of
three representatives from each of Liberty Global and Vodafone and
two members nominated by the Works Council. Certain matters will
require unanimous approval of both companies’ representatives. The
post of Chairman will be held for alternating 12 month periods by a
Liberty Global or Vodafone appointed director. Key management
positions will be announced prior to completion of the
transaction.
Each shareholder has the right to initiate an Initial Public
Offering of the JV after the third anniversary of closing, with the
opportunity for the other shareholder to sell shares in the IPO on
a pro-rata basis. The parties have agreed to restrictions on other
transfers of interests in the JV until the fourth anniversary of
closing. After the fourth anniversary, each shareholder will be
able to initiate a sale of the entire JV to a third party, subject
to a right of first offer in favor of the other shareholder.
Integration, Organization and Employees
Vodafone and Liberty Global recognize that their employees will
be vital to the success of the JV. The agreement to merge Vodafone
Netherlands and Ziggo is subject to customary consultations with
the respective Works Councils.
Conditions to Completion and Indicative Timetable
The transaction is subject to prior regulatory approval. Liberty
Global and Vodafone have undertaken preparatory work on the
required competition filings and will formally request approval
from the European Commission in due course.
Based on the required steps and subject to the customary closing
conditions and approvals, Liberty Global and Vodafone anticipate
that completion will take place around the end of 2016.
The transaction is not subject to Vodafone or Liberty Global
shareholder approvals.
Investor and Analyst Calls
Vodafone is hosting a conference call on Tuesday, February 16,
2016 for analysts and investors, which will start promptly at 09.00
a.m. (London time). Please dial into this conference call using the
following numbers:
UK Participant
dial in Toll: +44 (0) 20 3426 2889 UK Participant dial in
Toll-Free: 0808 237 0035 US Participant dial in Toll: +1 347 329
1282 US Participant dial in Toll-Free: 1877 841 4558 REPLAY
UK Toll: +44 (0) 20 3426 2807 UK Toll-Free: 0808 237 0026 US
Toll-Free: +1 866 535 8030 PIN: 668241#
Liberty Global is hosting a conference call on Tuesday, February
16, 2016 for analysts and investors. The call will start promptly
at 09.00 a.m. (New York Time). During the call Liberty Global will
discuss its 2015 results and business, including those of the
Liberty Global Group and the LiLAC Group, and expects to address
the joint venture, comment on the company’s outlook and provide
other forward-looking information.
Please dial into this conference call using the following
numbers:
United States
+1 888 204 4485
International +1 913 312 0949
The conference call will also be webcast live from
www.libertyglobal.com.
Transaction Advisers
In connection with the transaction, Goldman Sachs and LionTree
Advisors are acting as financial advisers to Liberty Global, and
Freshfields Bruckhaus Deringer and Allen & Overy are acting as
legal advisers to Liberty Global. Morgan Stanley, Robey Warshaw and
UBS are acting as financial advisers to Vodafone and Slaughter and
May and NautaDutilh are acting as legal advisers to Vodafone.
About Vodafone Group
Vodafone is one of the world’s largest telecommunications
companies and provides a range of services including voice,
messaging, data and fixed communications. Vodafone has mobile
operations in 26 countries, partners with mobile networks in 57
more, and fixed broadband operations in 17 markets. As of December
31, 2015, Vodafone had 461 million mobile customers and 13 million
fixed broadband customers. For more information, please visit:
www.vodafone.com.
About Vodafone Netherlands
For the twelve months ended December 31, 2015, Vodafone
Netherlands reported profit before tax of €94 million. As at
December 31, 2015, Vodafone Netherlands reported gross assets of
€3,771 million.
About Liberty Global
Liberty Global is the largest international cable company with
operations in 14 countries. Liberty Global connects people to the
digital world and enables them to discover and experience its
endless possibilities. Liberty Global’s market-leading products are
provided through next-generation networks and innovative technology
platforms that connected 27 million customers subscribing to 57
million television, broadband internet and telephony services at
December 31, 2015. In addition, Liberty Global served five million
mobile subscribers and offered WiFi service across six million
access points.
Liberty Global’s businesses are currently attributed to two
tracking stock groups: the Liberty Global Group (NASDAQ: LBTYA,
LBTYB and LBTYK), which primarily comprises Liberty Global’s
European operations, and the LiLAC Group (NASDAQ: LILA and LILAK,
OTC Link: LILAB), which comprises Liberty Global’s operations in
Latin America and the Caribbean.
Liberty Global’s consumer brands are Virgin Media, Ziggo,
Unitymedia, Telenet, UPC, VTR and Liberty. Liberty Global’s
operations also include Liberty Global Business Services and
Liberty Global Ventures.
About Ziggo
For the twelve months ended December 31, 2015, Ziggo (including
Sport1) incurred a loss before tax of €485 million. As at December
31, 2015, Ziggo (including Sport1) had gross assets of €20.7
billion.
Important Notice
Certain information contained in this document constitutes
“forward-looking statements”, which can be identified by the use of
terms such as “may”, “will”, “should”, “expect”, “anticipate”,
“project”, “estimate”, “intend”, “continue”, “target” or “believe”
(or the negatives thereof) or other variations thereon or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. Such statements
express the intentions, opinions, or current expectations of the
parties with respect to possible future events and are based on
current plans, estimates and forecasts, which the parties have made
to the best of their respective knowledge, concerning, among other
things, the respective business, results of operations, financial
position, prospects, growth and strategies of Liberty Global and
Vodafone, statements regarding the transaction and the anticipated
consequences and benefits of the transaction, the future growth
prospects of the JV, the targeted closing date of the transaction,
and the intended financing for the JV, including the intended
leverage. Due to various risks and uncertainties, actual events or
results or actual performance may differ materially from those
reflected or contemplated in such forward-looking statements.
Such risks and uncertainties include, but are not limited to
regulatory approvals that may require acceptance of conditions with
potential adverse impacts; risk involving the parties’ respective
ability to realize expected benefits associated with the
transaction; the impact of legal or other proceedings; and
continued growth in the market for broadband communications and
mobile services and general economic conditions in the relevant
market(s).
Furthermore, a review of the reasons why actual results and
developments may differ materially from the expectations disclosed
or implied within forward-looking statements can be found:
- under “Forward-looking statements” and
“Principal risk factors and uncertainties” in the Vodafone Group
Plc’s annual report for the year ended March 31, 2015;
- under "Other Information –
Forward-Looking Statements" in Vodafone Group Plc's Half-Year
Financial Report for the six months ended September 30, 2015;
and
- in Liberty Global’s filings with the
U.S. Securities and Exchange Commission, including its most
recently filed Form 10-K and Forms 10-Q.
No assurances can be given that the forward-looking statements
in this announcement will be realized. As a result, recipients
should not rely on such forward-looking statements. Subject to
compliance with applicable law and regulations, the parties
undertake no obligation to update these forward-looking statements.
No representation or warranty is made as to the reasonableness of
such forward-looking statements. No statement in this document is
intended to be nor may be construed as a profit forecast and no
statement in this document should be interpreted to mean that the
earnings per share of Vodafone, as altered by the JV, will
necessarily match or exceed the historical or published earnings
per share of Vodafone or the relevant entities which form the basis
for the JV.
1 The €280 million of cost and capex savings are stated
before integration costs and comprises more than €240 million of
operating cost savings to be realized upon the completion of the
integration activities. 2 Ziggo’s €7.3 billion of net debt is based
upon third-party net debt and transaction related debt-like
adjustments as of September 30, 2015 and is subject to customary
closing adjustments. 3 Covenant EBITDA is calculated in accordance
with Ziggo’s third party debt agreements. 4 Represents combined
revenue generating units of Liberty Global and Vodafone (as defined
by each) as at December 31, 2015. 5 Ziggo amounts are prepared
under United States Generally Accepted Accounting Principles and
Vodafone Netherlands amounts are prepared under International
Financial Reporting Standards as issued by the International
Accounting Standards Board. 6 The historical Ziggo amounts include
Liberty Global‘s cable operations in the Netherlands and the Sport1
premium sports channel that will be contributed to the JV. 7 For
Ziggo, OCF represents operating income before share-based
compensation, related-party fees and allocations, depreciation and
amortization, impairment, restructuring and other operating items.
8 Vodafone Netherlands EBITDA is stated after share-based
compensation expense of €2 million and net recharges paid to other
Vodafone Group companies of €53 million. 9 Amount includes
estimated charges related to operating and capital activities. 10
The €321 million figure represents an estimate of the net operating
losses to be contributed as of December 31, 2015. The contributed
amount may vary at closing, depending on the taxable results
reported in the intervening period. 11 The €2.9 billion figure
represents an estimate of the net operating losses to be retained
as of December 31, 2015. The retained amount may vary at closing,
depending on the taxable results reported, including giving effect
to the transaction, in the intervening period.
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version on businesswire.com: http://www.businesswire.com/news/home/20160215005705/en/
Liberty GlobalInvestor RelationsOskar Nooij,
+1 303 220 4218orChristian Fangmann, +49 221 84 62 5151orJohn Rea,
+1 303 220 4238orCorporate CommunicationsMatt Beake,
+44 20 8483 6428orTim Burt, +44 20 7240 2486orAimee Baxter, +1 646
561 3512orVodafone GroupInvestor RelationsTel:
+44 (0) 7919 990 230orMedia
Relationswww.vodafone.com/media/contact
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