In a groundbreaking move, Iliad and Vodafone are set to join forces in a strategic merger that has gained unanimous support from Iliad’s board of directors and its primary shareholder, Xavier Niel. The proposal aims to amalgamate Iliad’s ‘innovative approach to connectivity, affordability, and digital inclusivity’ with Vodafone’s expertise in the business-to-business (B2B) sector.
The proposed valuation assigns Vodafone Italia a price tag of €10.45 billion and Iliad Italia at €4.45 billion. The envisioned joint venture, referred to as NewCo, would see both companies sharing 50% of the share capital. Vodafone stands to receive a €6.5 billion cash payment and a €2.0 billion shareholder loan, while Iliad would obtain a €500 million cash payment and a €2.0 billion shareholder loan.
As part of the arrangement, Iliad secures a call option on Vodafone’s equity stake in NewCo, enabling the acquisition of a 10% share capital block annually at a price corresponding to the equity value at closing. If fully exercised, this option could result in an additional €1.95 billion in cash for Vodafone.
Anticipated to generate revenues of €5.8 billion and EBITDAaL of approximately €1.6 billion by March 2024, the merged entity aims to be a formidable force in the Italian telecom market. Thomas Reynaud, Iliad Group CEO, expressed confidence in the venture, stating, “NewCo would be fully committed to accelerating the country’s digital transformation and especially fibre adoption and 5G deployment, with more than €4 billion of investment planned over the next 5 years.”
Vodafone responded to the proposal, indicating support for in-market consolidation in Italy, where appropriate returns on invested capital are not achieved. However, the statement cautioned that there is no certainty about the finalization of any transaction, with Vodafone exploring various options, including a merger or disposal.
This strategic move comes after Iliad’s unsuccessful attempt to acquire Vodafone’s Italian operation last year. The highly competitive Italian telecoms market adds an element of uncertainty, making Vodafone’s cautious response indicative of the evolving nature of this potential merger.
