TIDMZEG
RNS Number : 7259T
Zegona Communications PLC
29 March 2021
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ZEGONA COMMUNICATIONS PLC ("Zegona")
LEI: 213800ASI1VZL2ED4S65
29 March 2021
MASMOVIL OFFER TO ACQUIRE EUSKALTEL VALUES ZEGONA AT GBP1.70 PER
SHARE(1)
Zegona Communications plc ("Zegona") today announces that a
wholly-owned subsidiary of MasMovil Ibercom, S.A.U. ("MasMovil"), a
portfolio company of the private equity funds KKR, Providence and
Cinven, has launched a tender offer to acquire 100% of Euskaltel,
S.A. ("Euskaltel") for EUR11.17 per share in cash (the "Offer").
Euskaltel is Zegona's Spanish telecoms investment and its main
asset. Zegona is the lead shareholder in Euskaltel, owning 21.4% of
the company (38.3 million shares).
Attractive valuation for Euskaltel
-- MasMovil's Offer at EUR11.17 per share in cash values
Euskaltel's equity at EUR2.0 billion, equating to an Enterprise
Value of EUR3.5 billion(2)
-- The transaction represents a 27% premium to Euskaltel's 30-day VWAP(3)
-- The transaction values Euskaltel at 10.1x EBITDA and 21x
Operating Cash Flow, a significant premium to European
telecommunications multiples(4)
Substantial value creation for Zegona shareholders
-- The Offer values Zegona's 21.4% shareholding at c.EUR428 million
-- This equates to a Zegona Underlying Asset Value of GBP1.70
per share(1) , which represents an 80% premium to Zegona's current
share price (94.5p)(5)
-- The Offer represents a return on Zegona's Net Invested Capital of 87%(6)
Euskaltel's largest shareholders committed to transaction
-- Euskaltel's three largest shareholders (Zegona, Kutxabank and
Alba), who own over 52%, have entered into irrevocable undertakings
to tender all their shares
-- Approach considered friendly and attractive by Euskaltel's
Board - Euskaltel has entered into a Collaboration Agreement with
MasMovil in relation to the Offer
Eamonn O'Hare, Zegona's Chairman and CEO commented:
"When we originally invested in Spain in 2015, we identified the
opportunity for substantial value creation, with further upside
potential from industry consolidation. In 2019, we became
Euskaltel's largest shareholder and, through the introduction of
José Miguel García as CEO and Board representation, we implemented
our plan to drive significant change in the business. This included
realising synergies from the combination of the three northern
Spanish CableCos, getting the combined business back to growth and
expanding nationally by launching the Virgin telco brand. Today's
offer underscores the success of our strategy in Spain and provides
significant value creation for Zegona shareholders."
Enquiries
Tavistock (Public Relations adviser - UK)
Tel: +44 (0)20 7920 3150
Jos Simson / Lulu Bridges - jos.simson@tavistock.co.uk /
lulu.bridges@tavistock.co.uk
About Zegona
Zegona was established in 2015 with the objective of investing
in businesses in the European Telecommunications, Media and
Technology sector and improving their performance to deliver
attractive shareholder returns. Zegona is led by former Virgin
Media executives Eamonn O'Hare and Robert Samuelson.
Zegona's first transaction was the EUR640m acquisition of
Telecable in August 2015, the leading quad-play telecommunications
operator in Asturias, Spain. In 2017, Zegona sold Telecable for a
total consideration of up to EUR701 million(7) to the northern
Spanish telecoms group Euskaltel. As part of the transaction,
Zegona returned GBP140 million of capital to its shareholders and
became a 15% shareholder in Euskaltel.
In 2019, Zegona became the largest shareholder in Euskaltel and
through the introduction of José Miguel García as CEO implemented a
plan to drive significant change in the business including the
introduction of the Virgin telco brand to expand nationally.
About Euskaltel
Euskaltel is the leading converged telecommunications provider
in northern Spain and has recently expanded to offer services
nationally. It provides high speed broadband, data-rich mobile,
advanced TV and fixed communications services to residential and
business customers under the Euskaltel, R Cable, Telecable and
Virgin telco brands. Euskaltel is a public company traded on the
stock markets of Bilbao, Madrid, Barcelona and Valencia.
Notes:
1. Zegona's Underlying Asset Value per share is a computation of
the Sterling equivalent of the value of Zegona's investment in
Euskaltel at the Offer price of EUR11.17 per share, the contingent
consideration (which is expected by Zegona to be paid no later than
15 days after the settlement of the Offer at the value of EUR8.654
million, which is the liability to Zegona recorded in Euskaltel's
Financial Statements for the year ended 31 December 2020) and its
estimated cash and cash equivalents net of its bank borrowings as
at 26 March 2021, divided by the total number of Zegona shares
outstanding, translated where relevant using a GBP/EUR exchange
rate of 1.168. Other assets and liabilities are not included in the
calculation but historically have not been material. The
calculation also includes no value (liability) for Zegona's
management incentive scheme
2. Euskaltel's Enterprise Value is based on the Offer price of
EUR11.17 per share, its total number of shares outstanding of
178,645,360 and Euskaltel's reported net debt at the end of 2020 of
EUR1,454.8 million
3. Euskaltel's 30-day Volume Weighted Average Price (VWAP) of
EUR8.82, based on the closing prices and reported trading volumes
for the 30 trading days up to 26 March 2021
4. Euskaltel multiples based on its Enterprise Value divided by
its reported 2020 EBITDA (as defined by Euskaltel) of EUR342.8
million and reported 2020 Operating Cash Flow (as defined by
Euskaltel as EBITDA-Capex) of EUR164.5 million. Comparable European
Cable company multiples of 6.7x 2020 EBITDA and 13.3x 2020
Operating Cash Flow (Source: Citigroup)
5. Premium to Zegona's share price at market close on 26 March 2021 of 94.5 pence
6. Return on Zegona's Net Invested Capital represents the value
of Zegona's main assets implied by the Offer against the net
shareholder investment in Zegona. It is calculated as the
percentage by which Zegona's Underlying Asset Value exceeds
Zegona's Net Invested Capital. Zegona's Net Invested Capital
represents the net amount of all shareholder subscriptions less all
returns to shareholders, including dividends, capital returns and
share buy-backs since Zegona's initial quotation on the AIM Market
in March 2015. As at 26 March 2021, Zegona's Net Invested Capital
was GBP198.5 million
7. Total value of up to EUR701 million comprised an Enterprise
Value of EUR686 million and a contingent deferred payment of up to
EUR15 million related to tax assets acquired
Further Details on the Transaction
Irrevocable Undertakings
Zegona and MasMovil entered into an irrevocable agreement on 27
March 2021 by virtue of which MasMovil has undertaken to launch the
Offer and the Zegona to accept the Offer and tender its
shareholding during the acceptance period (the "Irrevocable
Undertaking"). Kutxabank (19.9% shareholder in Euskaltel) and Alba
(11% shareholder in Euskaltel) have signed substantially equivalent
irrevocable undertakings, resulting in over 52% of Euskaltel's
total outstanding shares being subject to irrevocable undertakings
to tender in the Offer.
The main terms of the Irrevocable Undertaking are as
follows:
Obligations on the offeror, MasMovil, include amongst
others:
1. Announcement of the Offer
Formal announcement of the Offer to be made before market
opening on the business day following the signing of the
Irrevocable Undertaking. Offer to be at EUR11.17 per share in cash
and for 100% of Euskaltel
2. No right to withdraw the Offer without the authorisation of
Zegona if any conditions are required for regulatory approvals
3. Regional and customer commitments
A range of commitments in the event that the Offer is successful
and MasMovil is the controlling shareholder of Euskaltel, including
to maintain Euskaltel's Basque headquarters and not execute a mass
redundancy programme for a period of at least five years, to
prioritise the deployment of a 5G network in the Basque Region, and
to promote actions to ensure prompt access for Euskaltel's
customers to ultra-fast FTTH broadband services
4. Limitation on the subsequent sale of Euskaltel
An undertaking not to sell, directly or indirectly, Euskaltel's
shares to a third party at a price higher than that finally paid in
the Offer within a period of 2 years from settlement of the Offer,
save in the event of an eventual sale or IPO of MasMovil Ibercom,
S.A.U.
Obligations on Zegona include amongst others:
1. Disposal of the Shares
Zegona has committed to tender all its Euskaltel shares in the
Offer during the acceptance period and not to sell or transfer its
Euskaltel shares during the period of the Offer
2. Exercise of voting rights in relation to the Offer
Zegona has undertaken to use its voting rights in Euskaltel to
vote against any resolution that could prevent or frustrate the
Offer or which could significantly reduce the synergies
available
Breach:
In the event of a material breach of the Irrevocable Undertaking
by either party, the breaching party shall pay the non-breaching
party, as liquidated damages, an amount equivalent to 15% of the
value of Zegona's Euskaltel shareholding as calculated at the Offer
price. This is not an exhaustive remedy for wilful misconduct,
gross negligence or fraud.
Conditions
The Offer is subject to the following conditions:
1. Regulatory approvals
2. The acceptance of the Offer by a number of shares
representing at least 75% plus one share of the total outstanding
share capital of Euskaltel
Timing
The Spanish tender offer process is expected to take around 6
months from announcement to settlement. However, this timeline can
be impacted by any delays in regulatory reviews and approvals and
if there are competing offers.
IMPORTANT NOTICES
Zegona is listed on the standard listing segment of the Official
List of the Financial Conduct Authority and the Main Market for
listed securities of the London Stock Exchange. 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.
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",
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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
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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
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which speak only as of the date of this announcement.
Underlying Asset Value per share
The Underlying Asset Value per share of Zegona is a calculation,
not a forecast value for Zegona's shareholders. There can be no
assurance that such a value will be achieved and investors should
place no reliance on such value when making an investment decision.
Nothing in this announcement is intended, or is to be construed, as
a forecast of the expected value to Zegona's shareholders.
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