TIDMZEG
RNS Number : 1776M
Zegona Communications PLC
26 July 2017
ZEGONA COMMUNICATIONS PLC
Zegona TO RETURN GBP140M TO SHAREHOLDERS REPRESENTING 71p per
zegona share
London, England, 26 July 2017 - Zegona Communications PLC today
announces the completion of the sale of Telecable to Euskaltel(1)
and its intention to return GBP140m to shareholders via a tender
offer
The sale of Telecable provides opportunity for significant
capital returns to Zegona shareholders:
-- The transaction has generated significant upfront cash
proceeds and Zegona intends promptly to return up to GBP140m to
shareholders, representing 71p per share (44% of Zegona's market
capitalisation(2) ).
-- We plan to return capital through a tender offer conducted by
an intermediary. Full details of the offer and the required general
meeting(3) will be set out in a circular to be sent to
shareholders
-- Targeted 2017 dividend reconfirmed, GBP9.8m total pay-out
(equivalent to 5p per existing Zegona share)(4)
-- Total cash return to Zegona shareholders from the proposed
tender offer and dividends to the end of 2017 equals 55% of initial
equity invested(5) , whilst still retaining exposure to underlying
Euskaltel cash flows of similar magnitude to Telecable
standalone(6)
Zegona sees potential to drive additional value through its 15%
shareholding in Euskaltel:
-- Acquisition of Telecable establishes Euskaltel as the leading
integrated telecoms operator in northern Spain with EUR711m
Revenues, EUR346m EBITDA and EUR224m Cash Flow(7) . Euskaltel's
increased scale and strong cash generation create a robust platform
for growth
-- Substantial synergies available, valued by Euskaltel at
EUR245m, equivalent to EUR1.37 per Euskaltel share(8)
-- Opportunity to close the current Euskaltel value gap -
Euskaltel trades at an Equity Free Cash Flow yield of 12%, versus
European Cable average of 5%(9)
-- Euskaltel Board strengthened by addition of Robert Samuelson
(Zegona COO) and Jon James (ex ComHem COO)
-- Zegona expects to help drive Euskaltel performance
improvement, leveraging its influence at the Euskatel Board and
newly formed Strategy Committee(10) and its positive relationship
with Euskaltel's largest shareholders
-- Zegona has the right to distribute Euskaltel stock to its
shareholders without any lock-up and will continuously evaluate its
investment position with the objective of optimising risk adjusted
returns to shareholders(11)
Eamonn O'Hare, Zegona's Chairman and CEO commented; "When we
acquired Telecable in 2015, we identified the clear opportunity for
substantial value creation through combining the three independent
cable operators in Northern Spain. This transaction turns that
vision into reality, generating attractive returns for our
shareholders and offering the potential for further significant
value gains.
Zegona has a strong commitment to ongoing cash returns and
today's announcement to return up to GBP140m to shareholders
quickly and tax efficiently, delivers on that commitment. In
addition, Zegona sees potential to deliver a 'second leg' of value
through its 15% shareholding in Euskaltel. We have established an
excellent rapport with Euskaltel's board, senior management and key
shareholders, and look forward to working with them to improve the
business and close Euskaltel's current valuation gap versus
industry peers.
Telecable was Zegona's first investment, and the completion of
this transaction demonstrates the attractiveness of our
'Buy-Fix-Sell' strategy. We continue to search for new investments
and we see many opportunities where we can again apply our
innovative strategy across the European TMT industry."
This announcement contains inside information.
Enquiries
Tavistock (Public Relations adviser)
Tel: +44 (0)20 7920 3150
Jos Simson - jos.simson@tavistock.co.uk
Lulu Bridges - lulu.bridges@tavistock.co.uk
Mike Bartlett - mike.bartlett@tavistock.co.uk
About Zegona
Zegona was established with the objective of acquiring
businesses in the European Telecommunications, Media and Technology
("TMT") sector with a 'Buy-Fix-Sell' strategy to deliver attractive
shareholder returns. Zegona is listed on The London Stock
Exchange's Main Market and is led by former Virgin Media
executives, Eamonn O'Hare and Robert Samuelson.
Zegona acquired Telecable, the leading quad play cable
telecommunications operator in the Asturias region of Spain in
August 2015.
Notes:
1 Zegona and its wholly-owned subsidiary, Zegona Limited
completed the sale by Zegona Limited of Parselaya, S.L.U., the
holding company of the Telecable group, on 26 July 2017
2 Zegona market capitalisation of GBP318m based on share price
of GBP1.62 as at market close on 25 July 2017
3 The tender offer will be conditional upon shareholders passing
an ordinary resolution to approve the requisite repurchase of
shares. At the general meeting convened to approve the repurchase,
a special resolution will also be proposed to amend Zegona's
articles of association to give the board of directors the power to
make distributions in specie
4 Zegona intends to adjust the dividend per share following the
tender offer such that a total dividend of GBP9.8m is paid in 2017.
Anticipated dividends from Euskaltel will help fund future Zegona
dividends. Euskaltel's current dividend is EUR36c per share (EUR55m
in 2017) - Euskaltel has stated that it intends to increase its
annual dividend pay-out at a double-digit rate
5 Total Zegona equity raised GBP286.5m. Total cash intended to
be returned to shareholders of up to GBP158.6m comprised of up to
GBP140m from the proposed tender offer, dividends paid of GBP8.8m
(4.5p on 196m shares), and 2017 dividends targeted to be paid of
GBP9.8m (equivalent to 5p on 196m shares)
6 Zegona exposed to EUR36m Cash Flow based on 15% of Euskaltel
Pro Forma 2016 Cash Flow of EUR224m plus anticipated run-rate
synergies of EUR17m from Telecable acquisition. At acquisition in
2015, Telecable's Cash Flow was EUR36.1m and in 2016 it was
EUR39.6m. Telecable's Cash Flow is Adjusted Cash Flow as defined on
page 12 of Zegona's 2016 Annual Report
7 Pro Forma results for combined business for 2016 (source: Euskaltel)
8 Total Euskaltel shares issued post completion of 178.6m
9 Euskaltel trades at a 2016 Equity Free Cash Flow Yield of
10.8% (at EUR8.50 share price) compared to European Cable average
of 5% (Source: JP Morgan). Pro Forma 2016 Equity Free Cash Flow
Yield for the combined business including estimated EUR17m run-rate
synergies of 12.1% (at same EUR8.50 share price) (source: Zegona
estimates)
10 For so long as Zegona holds at least 8.3 per cent. of the
issued share capital of Euskaltel, Zegona has the right to appoint
one shareholder director to the board of directors of Euskaltel,
who will also have the right to be a member of the Audit,
Remuneration and Strategy Committees. Robert Samuelson is being
appointed to the Euskaltel Board and its Committees
11 Customary lock-up provisions and limited other restrictions
including in relation to indemnities apply to Zegona's right to
sell or distribute Euskaltel stock
Important Notice
This announcement has been issued by, and is the sole
responsibility of, the Company.
This announcement has been prepared in accordance with English
law, the Listing Rules and the Disclosure Guidance and Transparency
Rules and information disclosed may not be the same as that which
would have been prepared in accordance with the laws of
jurisdictions outside England.
The distribution of this announcement in jurisdictions outside
the United Kingdom may be restricted by law and therefore persons
into whose possession this announcement comes should inform
themselves about, and observe such restrictions. Any failure to
comply with the restrictions may constitute a violation of the
securities law of any such jurisdiction.
Certain information in this announcement is based on management
estimates. By their nature, estimates may not be correct or
complete. Accordingly, no representation or warranty (express or
implied) is given that such estimates are correct or complete or
founded on reasonable grounds. No representation or warranty
(express or implied) is given that such estimates are founded on
reasonable grounds. Zegona does not undertake any obligation to
correct or complete any estimate whether as a result of being aware
of information (new or otherwise), future events or otherwise.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates",
"envisages", "plans", "anticipates", "targets", "aims",
"continues", "expects", "intends", "hopes", "may", "will", "would",
"could" or "should" or, in each case, their negative or other
variations or comparable terminology. These forward-looking
statements include matters that are not facts. By their nature,
forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances. A number of factors
could cause actual results and developments to differ materially
from those expressed or implied by the forward-looking statements,
including, without limitation: Euskaltel's ability to successfully
combine the business of Telecable and Euskaltel and to realise
operational efficiencies from that combination; the assessment of
Telecable's working capital and net debt at closing of the
acquisition could result in an adjustment to the cash consideration
payable; the tax credits which are required to be proven to
generate the contingent consideration may not arise or be usable;
conditions in the markets; the market position of Telecable and
Euskaltel; earnings, financial position, cash flows, return on
capital and operating margins of Telecable and Euskaltel;
anticipated investments and capital
expenditures of Telecable and Euskaltel; changing business or
other market conditions; and general economic conditions. These and
other factors could adversely affect the outcome and financial
effects of the plans and events described in this announcement.
Forward-looking statements contained in this announcement based on
past trends or activities should not be taken as a representation
that such trends or activities will continue in the future. Subject
to any requirement under the Listing Rules, Prospectus Rules, the
Disclosure Guidance and Transparency Rules or other applicable
legislation or regulation, Zegona does not undertake any obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Investors
should not place undue reliance on forward-looking statements,
which speak only as of the date of this announcement.
Target returns
The expected returns to Zegona shareholders are a target only
and not a profit forecast. There can be no assurance that the
target returns will be achieved and investors should place no
reliance on such targets when making an investment decision.
Nothing in this announcement is intended, or is to be construed, as
a profit forecast or to be interpreted to mean that earnings per
Zegona share for the current or future financial years will
necessarily match or exceed the historical published earnings per
Zegona share.
Company website
Neither the content of the Company's website, nor the content on
any website accessible from hyperlinks on its website for any other
website, is incorporated into, or forms part of, this announcement
nor, unless previously published by means of a recognised
information service, should any such content be relied upon in
reaching a decision as to whether or not to acquire, continue to
hold, or dispose of, securities in the Company.
The person responsible for arranging for the release of this
announcement on behalf of Zegona is Dean Checkley, whose business
address is 20 Buckingham Street, London, WC2N 6EF.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCOKADKNBKDQOB
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