iliad proposes merger of iliad Italia and Vodafone Italia

Monday, December 18th, 2023 
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The iliad Group submits proposal to Vodafone to join forces in Italy

Combining the Italian operations of iliad and Vodafone would create the most innovative telecom challenger for Italy.
Vodafone Italia valued at €10.45 billion.
Vodafone to get €8.5 billion of cash & shareholder loan.

  • The iliad Group has submitted to Vodafone Group a proposal for the merger of iliad Italia and Vodafone Italia
  • Proposal values Vodafone Italia at €10.45 billion (EV). Vodafone would obtain 50% of the share capital of NewCo, together with a €6.5 billion cash payment and a €2.0 billion shareholder loan to ensure long-term alignment. Vodafone’s equity in NewCo at closing valued at €1.95 billion
  • iliad Italia valued at €4.45 billion (EV). Iliad would obtain 50% of the share capital of NewCo, together with a €500 million cash payment and a €2.0 billion shareholder loan.

PARIS — The iliad Group today announces that it has submitted a proposal to Vodafone Group for the merger of iliad’s and Vodafone’s businesses in Italy through the creation of a new entity (“NewCo”) to establish an attractive market offering centered around innovation, growth, and unparalleled customer experience. This offer benefits from the unanimous support of iliad’s board of directors and its main shareholder Xavier Niel.

All information related to Vodafone and Vodafone Italia is based on public sources.

Potential creation of the most innovative Telecom challenger in Italy

Thanks to the joint expertise and talent at iliad and Vodafone, NewCo would become the leading actor for investment in cutting-edge technology and customer-centric solutions in the Italian telecom market, supporting and accelerating the country’s digital transformation and especially fiber adoption.

The combined entity would specifically benefit from iliad’s innovative approach to connectivity, affordability, and digital inclusivity as well as the expertise of Vodafone in B2B.

The proposed merger would create the most innovative challenger in an Italian market with 5 mobile network operators and more than 10 fixed broadband providers.

The proposed business combination is a compelling proposal for Vodafone’s stakeholders

iliad’s proposed enterprise value for Vodafone Italia of €10.45 billion would represent a significant premium in terms of EBITDAaL multiple reflecting the strong potential for NewCo as a strong telecoms player in the Italian markets following a merger:

  • Based on Vodafone Italia’s estimated EBITDAaL of €1.34 billion for FY2024 (as per broker consensus), the proposed transaction implies an EBITDAaL multiple of 7.8x, i.e. more than the 7.1x EBITDAaL multiple offered by iliad in its €11.25 billion offer in February 2022
  • Assuming €300 million of intercompany and other charges below EBITDAaL using similar charges/revenues ratio as in the Zegona/Vodafone Spain publicly disclosed information, the adjusted EBITDAaL multiple would be 10x.

The proposal offers both value and cash to Vodafone. The transaction also meets Vodafone’s publicly stated intention to transform and simplify the group.

As part of the proposed transaction, iliad would have a call option on Vodafone’s equity stake in NewCo and would be able to acquire a block of 10% of the NewCo share capital every year at a price per share equal to the equity value at closing. In the event iliad would choose to exercise the call options in full, this would generate an additional €1.95 billion in cash for Vodafone.

The financing of this transaction is supported by leading international banks.

The proposal would create a strong player with solid financial profile

The merged business would be expected to generate revenues of c€5.8 billion and EBITDAaL of approximatively €1.6 billion for financial year ending March 2024[1]. It would also benefit from expected annual run rate synergies of more than €600 million in Opex + Capex[2].

Upon closing of the proposed merger, leverage would stand at 4.5x net debt to EBITDAaL, with the objective to reduce to below 3x three years post-closing[3].

Thomas Reynaud, iliad Group CEO, said: “The market context in Italy calls for the creation of the most innovative telecom challenger, with ability to compete and create value in a competitive environment. We believe that the profiles and complementary expertise of iliad and Vodafone in Italy would allow us to build a strong operator with the ability and financial strength to invest for the long term. NewCo would be fully committed to accelerating the country’s digital transformation and especially fiber adoption and 5G deployment, with more than €4 billon of investment planned over the next 5 years.”

1. Based on broker consensus for Vodafone
2. iliad’s estimates based on previous European in-market Telecom merger
3. Source: debt of 7 billion as per iliad’s proposal and NewCo’s financials as per above, i.e. iliad’s own business plan for iliad Italia, broker consensus for Vodafone Italia and industry benchmark for synergies

Links: iliad; Vodafone