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Zegona loses out as Spain’s self-declared fourth national operator bulks up mobile business.
Masmovil on Tuesday fought off U.K. investment firm Zegona and agreed to acquire 100% of Yoigo, giving parent Telia Company its long-awaited route out of Spain.
The deal values Yoigo at €612 million, according to Masmovil. However, a separate statement from Telia said the deal is worth €625 million. With those two figures in mind, Telia’s 76.56% holding in Yoigo is worth between €468.5 million and €478.5 million. The acquisition price could increase by up to €96 million if the combined company reaches EBITDA of €300 million in 2019, Masmovil said.
The transaction will be 60% funded by debt with the remaining 40% funded by equity. Telia will divest its entire Yoigo stake, while minority shareholders will receive bonds that are convertible into Masmovil shares.
The deal is subject to clearance by Spain’s Comisión Nacional de Mercados y Competencia (CNMC), and is expected to close before the end of 2016.
"With this acquisition, Masmovil combines its fixed and broadband assets with Yoigo’s mobile assets to create a truly convergent operator which can benefit [from] economies of scale, reaching a relevant critical mass which shall enable the company to continue its strong growth path and shape a solid challenger in the Spanish telco market as desired by the European Commission," said Masmovil.
The combination of Masmovil with Yoigo and Pepephone – which Masmovil agreed to acquire in April for €158 million – creates an integrated service provider with approximately 4.2 million mobile customers and 70,000 fixed broadband customers. The merged entity had pro forma revenues of €1.07 billion, EBITDA of €108 million and operating cash flow of almost €50 million in 2015.
Masmovil expects to generate cost-savings of more than €60 million by 2019. Integration costs are expected to come in at €50 million over the next three years.
"The divestment of Yoigo is an important milestone in our ambition to increase focus on our operations in the Nordics and Baltics," said Telia CEO Johan Dennelind. "I am happy that we have an agreement with Masmovil, who will be able to leverage a small but great and agile team into a combined unit, creating an even stronger challenger in the Spanish market."
Telia has been looking for a way out of Spain for years.
The company put Yoigo up for sale in summer 2012, with the Spanish units of Orange and Vodafone, as well as Mexico-based America Movil, seen as possible suitors. However, the process was abandoned in April 2013 on the grounds that the offers received did not consider the company’s growth potential.
A sale was back on the cards by October 2015 though, after Telia received interest from Masmovil and several private equity firms.
Earlier this year, U.K. investment firm Zegona entered exclusive talks with Telia over Yoigo, after reportedly tabling a €500 million offer for the company.
Those exclusive negotiations did not deter Masmovil, with reports earlier this month claiming the company had upped its offer to €700 million from an initial €550 million.
On Monday, Zegona revealed that it had reached an agreement with Telia during the exclusive negotiating period, which expired on 1 June, but was unable to win over minority shareholders. At the time, Zegona said that it planned to push ahead with its Yoigo bid but that it considered Masmovil’s bid as "higher than that which Zegona considers to be fair and reasonable."
There were also questions over how Masmovil would fund its acquisition, whereas Zegona said that is bid was fully funded.
"Masmovil has received interest in [the] form of binding or highly confident letters as well as term sheets for more than 100% of the required funding," said Masmovil on Tuesday. "The funding of the transaction will be done together with the financing of Pepephone transaction."
