iliad Group presents an offer to Vodafone to join forces in Italy, with the aim of creating the most innovative telecommunications operator
Il iliad group announces today that it has presented to Vodafone Group a proposed merger of the businesses of iliad and Vodafone in Italy, through the establishment of a new company (“NewCo”) with the aim of developing an attractive market offering, based on innovation, growth and an unparalleled customer experience. The offer has the unanimous support of iliad’s board of directors and its main shareholder, Xavier Niel.
Iliad and Vodafone in Italy: potential creation of the most innovative telecommunications challenger operator in Italy
Thanks to the union of skills and talents of iliad and Vodafone, the NewCo it would become the protagonist on the Italian telecommunications market for investments in cutting-edge technologies and customer-centric solutions, supporting and accelerating the country’s digital transition and in particular the adoption of fiber optics.
The combined entity would benefit in particular from iliad’s innovative approach to digital connectivity, accessibility and inclusiveness, together with Vodafone’s expertise in B2B. The proposed merger would create the most innovative operator in an Italian market with 5 mobile network operators and over 10 fixed broadband providers.
Iliad and Vodafone in Italy: the business combination offer
The enterprise value proposed by iliad for Vodafone Italia, equal to 10.45 billion euroswould represent a significant premium in terms of EBITDAaL multiple, reflecting NewCo’s high potential as a leading telecommunications operator on the Italian market following the merger:
Based on theEBITDAaL estimated by Vodafone Italia of 1.34 billion euros for the 2024 financial year (according to broker consensus), the proposed transaction implies an EBITDAaL multiple of 7.8x, higher than the EBITDAaL multiple of 7.1x offered by iliad in its February 2022 offering of 11.25 billion euros.
Assuming 300 million euros of intercompany charges and further charges below EBITDAaL, using an expense/income ratio similar to that obtainable from publicly available data relating to theZegona/Vodafone Spain operation, the adjusted EBITDAaL multiple would be 10x. The proposal recognizes the value and liquidity of Vodafone. The deal would also fulfill Vodafone’s publicly stated objective of transforming and simplifying the group.
As part of the proposed transaction, iliad would have a call option on Vodafone’s stake in NewCo with the right to acquire the 10% of NewCo’s share capital at a price per share equal to the equity value at closing. Should iliad decide to fully exercise the call options, this would generate an additional €1.95 billion of liquidity for Vodafone. The financing of the operation is supported by leading international banks.
The proposal to create a strong operator
The combined entity would generate a turnover of approximately 5.8 billion euros and EBITDAaL of approximately €1.6 billion for the financial year ending March 2024. Furthermore, it would benefit from expected annual synergies of more than that 600 million euros in Opex + Capex. At the closing of the proposed merger, leverage would be at 4.5x net debt to EBITDAaL, with the goal of falling below 3x three years after closing
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