UNITED KINGDOM: Vodafone’s CEO, Margherita Della Valle, faces the challenging task of streamlining the £21 billion telecom group, but it’s a tough task. A potentially chaotic departure in Spain illustrates the point.
Della Valle lacks an obvious partner in the nation: the local giant Telefónica is too large, while rivals Orange and MásMóvil are combining with each other. Consequently, Vodafone may have found a potentially troublesome counterparty for its Spanish corporation, which Della Valle has placed under strategic examination.
Zegona Communications, a cash shell listed on the London Stock Exchange and led by former Virgin Media executive Eamonn O’Hare, is currently engaged in discussions to acquire a stake of at least 50% in Vodafone’s Spanish unit, with an estimated enterprise value exceeding 5 billion euros, as per reports from Bloomberg, citing sources familiar with the matter.
Citing Market Sources, the regional newspaper Expansión stated that Zegona might purchase the whole stock of the business with the aid of a loan worth 900 million euros from Vodafone and a debt package from Deutsche Bank (DBKGn.DE), ING (INGA.AS), and UniCredit (CRDI.MI).
Both alternatives come with challenges. If Zegona opts to purchase the entire division, it would need to take on substantial debt, which could pose a risk for Della Valle if Vodafone continues to be involved by providing financing to the buyer.
On the other hand, if they pursue a joint venture, a significant portion of the asset would remain on Vodafone’s balance sheet until Zegona or another entity can eventually afford to acquire it outright. Unfortunately, this scenario wouldn’t significantly enhance the parent company’s valuation.
While investors might appreciate Della Valle’s proactive approach, achieving a clean break in the Spanish market is becoming increasingly unlikely.
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