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MásMóvil in bid to take over Euskaltel

Spanish number four operator MásMóvil has launched a tender offer to acquire 100% control of Euskaltel in a friendly bid that has secured the acceptance of the northern regional cable operator’s main shareholders.

Euskaltel CEO José Miguel García unveiling the Virgin telco brand earlier this year

Euskaltel’s leading shareholder, UK-based investment outfit Zegona Communications, along with the group’s other main shareholders Kutxaband and Alba, which together own 52% of the company, have entered into irrevocable undertakings to tender all their shares in Euskaltel to KKR, Providence and Cinven-owned MásMóvil.

MásMóvil is offering €11.17 a share in cash, which values Euskaltel’s equity at €2 billion, giving it an enterprise value of €3.5 billion. The transaction represents a premium of 27% on Euskaltel’s 30- day average share price.

Euskaltel’s board has appointed Citigroup Global Markets Europe to advise it on the deal.

The takeover bid took the market, which had been focused on a likely combination of MásMóvil with Vodafone, by surprise. Euskaltel CEO José Miguel García had gone so far as to suggest that a merger of Vodafone with MásMóvil would provide an opportunity for his company in the way of regulatory remedies to ensure competition.

Euskaltel recently embarked on a national expansion strategy, launching services across Spain under the Virgin telco brand. The company’s core network assets are concentrated in the northern Spanish regions of the Basque Country, Asturias and Galicia.

The merger of the pair strengthens MásMóvil’s position as a national competitor to Telefónica, Orange and Vodafone, but raises some questions over the group’s debt level.

For Zegona, which has driven Euskaltel’s strategy since becoming its major investor and was behind the appointment of García and the launch of Virgin telco, the acquisition will delier an 87% return on its investment and an 80% premium on its share price.

“When we originally invested in Spain in 2015, we identified the opportunity for substantial value creation, with further upside potential from industry consolidation. In 2019, we became Euskaltel’s largest shareholder and, through the introduction of José Miguel García as CEO and Board representation, we implemented our plan to drive significant change in the business,” said Eamonn O’Hare Zegona’s chairman and CEO.

“This included realising synergies from the combination of the three northern Spanish CableCos, getting the combined business back to growth and expanding nationally by launching the Virgin telco brand. Today’s offer underscores the success of our strategy in Spain and provides significant value creation for Zegona shareholders.”