Zegona Communications, the UK-based telecom investment outfit that owns a significant stake in Spanish cable operator Euskaltel, soon to be acquired by MásMóvil, has given itself two years to re-invest in another European TMT sector operation before consulting on returning its remaining assets to shareholders.
On completing the sale of Euskaltel, Zegona has committed to return £335 million (€388 million) of its capital to shareholders, representing £1.53 per share.
The €2 billion sale of the Spanish operation values Zegona’s shares at £1.70 a share, giving the UK-based investor about €428 million in cash for its 21.44% stake in Euskaltel. This will convert into approximately £370 million, leaving a balance available for re-investment once the company has returned the bulk of proceeds to its shareholders.
Zegona’s management has meanwhile committed to increase their own investment in the company by £4 million. Following the reinvestments, Zegona expects to have a net cash balance of about £15 million, with management owning 28% of the business.
The company said it would continue to execute its Buy-Fix-Sell strategy across the European TMT sector with a focus on businesses that require active change to realise full value.
Zegona is targeting business valued at between £2-5 billion, and believes the fragmented TMT business, with over 100 operators, is ripe for acqusitions.
Zegona said that if it had not made a significant investment in two years it would consult with shareholders on the return of its remaining assets.
Eamonn O’Hare, Zegona’s Chairman and CEO said: “When we originally invested in Spain in 2015, we identified the opportunity for substantial value creation, with further upside potential from industry consolidation. The offer by MasMovil to acquire Euskaltel underscored the success of our strategy, delivering significant value for Zegona shareholders. Zegona has a well-established policy of raising capital when we need it and returning capital quickly and efficiently when we monetise our investments. Today’s announcement represents the return of the value from Euskaltel to shareholders and reflects Zegona management’s confidence in the opportunity to deliver an attractive new investment in the European TMT sector.”