Zegona Completes €5BN Vodafone Spain Acquisition

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31 May 2024

ZEGONA COMPLETES €5BN ACQUISITION OF VODAFONE SPAIN

Zegona Communications plc ("Zegona" or the "Company") is pleased to announce the completion of the acquisition of 100% of Vodafone Holdings Europe, S.L.U ("Vodafone Spain") for €5.0 billion.

Advantaged Transaction Terms

·    €5.0 billion valuation < 4x FY23 EBITDAaL¹

·    Euskaltel sold for 10.2x, MasMovil valued at 8.7x, Orange at 7.2x EBITDAaL²

·    €900 million Vodafone financing; €3.9 billion debt facility; 3.0x leverage³

·    Vodafone Group continues to provide brand and technical services

Vodafone Spain is strategically attractive

·    Vodafone is the No. 3 player in Spain with significant market shares in mobile, broadband and TV

·    Scale business with significant cash flow potential: €3.9 billion revenue, €1.3 billion EBITDAaL, €0.4 billion Cash Flow⁴

·    Leading integrated operator with strong market positions in both consumer and B2B segments

·    Gigabit capable fixed network passing 10.7 million homes with access to 95% of Spanish households

·    High quality, market leading, mobile network with 4G/5G spectrum

Opportunity to deliver significant value for Zegona Shareholders

·    Transform the business to deliver exceptional service to customers and attractive returns for investors

·    Inject highly experienced senior management team; José Miguel García appointed as CEO

·    Stabilise revenues with new commercial initiatives  

Eamonn O'Hare, Zegona's Chairman and CEO, said:

"We have now completed the acquisition of Vodafone Spain and look forward to transforming the business and returning it to growth. I am pleased to welcome José Miguel García to lead Vodafone Spain as CEO, reuniting a team that has a proven track record of highly successful operational transformations in Spanish telecoms.

"The new 10-year network access agreement signed with Finetwork earlier this week demonstrates our ability to move swiftly on our well-defined strategy. With our proven track record, we are confident we will improve the performance of Vodafone Spain whilst delivering significant value for shareholders."

Enquiries:

New senior management team in place

With effect from 1 June 2024, José Miguel García is appointed as CEO of Vodafone Spain. José Miguel García has a strong track record of creating value in the Spanish telecommunications market as CEO of Jazztel and CEO of Euskaltel (see below).

The senior management team of Vodafone Spain has now been significantly restructured and simplified. The size of the team has been reduced from 11 to 7, whilst recruiting 4 new high-quality executives.

Jose Miguel García's new senior management team is as follows:

·      Ángel Álvarez, the new Director of the Consumer Business Unit - former Chief Commercial Officer of Digi Spain

·      Jose Ortíz Martínez, the new Director of Legal and Regulation - former Legal Director of Jazztel and Euskaltel

·      Berta Álvarez Stuber, the new Director of Human Resources - former Human Resources Director of Euskaltel

·      Eloy Rodrigo Gil will remain as Finance Director

·      Jesús Suso will remain as Director of the Enterprise Business Unit

·      Julia Velasco will remain as Network Director, but will also now manage IT systems and customer operations

About José Miguel García

José Miguel García has a strong track record of creating value in the Spanish telecommunications market, including his tenure as CEO of Euskaltel. Under his stewardship and the support of the Zegona team, the business was restructured and fundamentally transformed. The sale of Euskaltel to MasMovil for €3.5 billion delivered an 87% return for Zegona Shareholders⁵.

José Miguel García was also CEO at Jazztel from 2006 to 2015, where he transformed Jazztel into a leading telecommunications brand. He was instrumental in delivering 4x revenue growth during that period. The sale of Jazztel to Orange for €3.4 billion resulted in €2.8 billion of value creation (6x return) during his time as CEO.

Re-admission of Zegona Shares to trading on the LSE's Main Market

Re-admission of 704,149,410 Zegona Shares, comprising the entire issued share capital of Zegona, to the standard listing segment of the FCA's Official List and to trading on LSE's Main Market for listed securities, is expected to take place at 8.00 a.m. on 3 June 2024 (the trading day following Completion).

Extended Newco Lock-in

As of 31 October 2023, Newco had undertaken to the Company that, amongst other things, Newco would not dispose of any Zegona Shares for a period of six months following Completion (or, if later, until the Corporate Bridge Facility has been repaid or refinanced) (subject to certain limited exceptions).

It has now been agreed, by way of an amendment to the Conditional Subscription and Relationship Agreement, that such lock-in period will be extended to two years following Completion.

Newco appointed four new independent directors upon Completion to replace its existing directors.

AGM Notice

Zegona has today convened its Annual General Meeting for 10 a.m. on 28 June 2024 to take place at the offices of Travers Smith LLP, 10 Snow Hill, London EC1A 2AL.

Formal notice convening the Annual General Meeting and the related circular will be posted on the Company's website shortly and will be sent to shareholders alongside the Annual Report. The documents will also be made available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Accounting Reference Date

The Board has resolved to change Zegona's accounting reference date to 31 March. Zegona will publish interim financial statements for the six months to 30 June 2024 on or before 30 September 2024 and thereafter will publish annual financial statements for the 15-month period ending 31 March 2025.

Notes

Unless defined otherwise, capitalised terms in this announcement shall have the same meaning as in Zegona's prospectus dated 13 November 2023.

1.     "EBITDAaL" when referring to Zegona or Vodafone Spain is defined as Vodafone Group Spain segment's reported Adjusted EBITDAaL adjusted in line with Zegona's accounting policy relating to subscriber acquisition costs

2.     Based on the relevant company's reported transaction multiples

3.     Based on FY23 EBITDAaL

4.     Based on FY23. "Cash Flow" is defined as EBITDAaL less capex (accrual) excluding licence and Spectrum fees

5.     See return on net invested capital in Zegona's announcement on 29 March 2021

IMPORTANT INFORMATION

This announcement is an announcement and not a circular or prospectus or equivalent document and prospective investors should not make any investment decision on the basis of its contents.

Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into or from any jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction. Any failure to comply with this restriction may constitute a violation of such laws or regulations. Persons into whose possession this announcement or other information referred to herein should inform themselves about, and observe, any restrictions in such laws or regulations.

Nothing in this announcement constitutes an offer of securities for sale in any jurisdiction. Neither this announcement nor any part of it constitutes or forms part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any of the Company's securities in the United States, Canada, Australia, Japan or South Africa or any other jurisdiction in which the same would be unlawful. The securities of the Company may not be offered or sold in the United States absent registration under the US Securities Act of 1933, as amended (the "US Securities Act"), or an exemption therefrom. The securities referred to herein have not been and will not be registered under the US Securities Act or under the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold, taken up, resold, transferred or delivered in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in accordance with any applicable securities laws of any state or other jurisdiction of the United States. There has not been and will be no public offer of the Company's securities in the United States.

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