Euskaltel Group carries out the full telecommunications consolidation in the north of Spain
Bilbao, 16 May 2017. Euskaltel Group and Zegona have reached today an agreement by means of which the Euskaltel Group acquires 100% of Telecable, the leading operator in Asturias, to therefore build the leading telecommunications group in Northern Spain. The transaction has been approved unanimously by the Board of Directors of Euskaltel, and will be completed after the ratification in the next Shareholders' General Meeting of the Group and its clearance by the antitrust authorities.
This transaction represents an important landmark in the history of the companies and the industry itself. It entails the creation of the leading convergent fibre optics operator within the telecommunications market of the State. The transaction provides Euskaltel Group, and each of the trademarks it encompasses, with a greater strength, efficiency and growth potential, in an industry of great competition as telecommunications.
One year and a half after the integration agreement between Euskaltel and R, Telecable becomes part of the leading Telecommunications Group in the North of Spain, which from now on will offer its services to a market of 6 million people, increasing 20% the Group?s market, providing 2.4 million of daily services to more than 800,000 customers, with a high penetration ratio (67%) of 3 and 4 products in its customer base.
The addition of the three markets in which the Group operates -the Basque Country, Galicia and Asturias-, represents 12.76% of the population and the 13.34% of the whole State?s GDP.
From a financial point of view, the consolidation of the results rises the Group?s turnover up to EUR 711 million (+24%), with an EBITDA of EUR 346 (+23%) and a cash flow of EUR 224 million (+21%), maintaining one of the highest cash generating ratios of the industry in Europe.
The resulting group will maintain the local character of Euskaltel, R and Telecable in the Basque Country, Galicia and Asturias, respectively, which entails the continuity of its trademarks and professional teams.
According to the agreement reached, Euskaltel Group will take control over Telecable by means of the acquisition of 100% of its share capital to Zegona Limited, which is the owner of 100% of the shares of Telecable.
The agreed value for Telecable has been EUR 686 million, including EUR 245 million of its estimated debt at 30 June 2017 (that will be refinanced by Euskaltel), with a consideration of EUR 186.5 million in cash and 26.8 million of newly issued ordinary shares that will be subscribed by Zegona at a price of 9.5 euros per share (254,6 milion), which represent 15% of the share capital of Euskaltel after the share capital increase, which will have to be passed by the next Shareholders' General Meeting.
This valuation represents 8.5 times the Ebitda post synergies, which confirms the interest of the operation in terms of creation of value for the shareholders.
After the transaction, the debt to EBITDA ratio will be 4.5x (synergies included), so the Group will maintain the shareholders? remuneration in the terms announced to the market. Likewise, Euskaltel foresees that this ratio will decrease to 4 times the EBITDA (synergies included) at the end of 2018, as it announced to the market.
After the share capital increase, Kutxabank will have a 21.3% stake and Corporación Financiera Alba will have a 9.35% stake in the share capital of Euskaltel. The main shareholders, including Zegona, have expressed throughout the talks their commitment to the roots of the Euskaltel Group in its territory.
Kutxabank and Alba, significant shareholders of Euskaltel with representation on its Board of Directors, have expressed their support for the integration of Telecable and favorably value the incorporation of Zegona as a relevant shareholder in the Euskaltel project.
The agreement executed completes the conversations initiated between Euskaltel and Zegona, which were notified to the National Commission of the Stock Market on the last 14 March (CNMV).
The chairman of Euskaltel Group, Alberto García Erauzkin, has expressed his satisfaction as "this transaction completes the full cable consolidation in the north of the State. Euskaltel, and R and Telecable, are leaders in our markets and the addition of the three great north operators makes as leaders in the State. Our intention is to maintain each of the companies' values, such as the trademarks and the people?s talent, as they are the key of their success. We are a business project that makes its sense in the generation of value for our stakeholders: shareholders, human team and for the Basque, Galician, and now Asturian societies, in which we are integrated".
García Erauzkin has emphasised that "our strategy involves creating and consolidating the leadership in our markets, compatible with the maintenance of the roots and the compromise in the three territories. The integration of Telecable in the Euskaltel Group entails also the incorporation as shareholder of Zegona, which will bring its wide experience in the sector".
Francisco Arteche, CEO of the Group, has valued very positively the result of the acquisition of Telecable, as it "means the addition of a market, team of people, a telecommunications net over which we will design new advanced services. This addition of capacities will add an important growth potential to the Group so as to keep featuring the digital promotion of the Basque, Galician and Asturian societies".
Arteche has stressed that "this merger will benefit customers, employees and providers, as we are companies that share a strong and clear drive for proximity, quality and innovation in products and services".
Eamonn O'Hare, Zegona's Chairman and CEO expressed his support for Euskaltel's strategy of consolidating the North of Spain: "When we acquired Telecable in 2015, we identified the potential for substantial value creation through the combination of the 3 independent Northern Spanish Cablecos. This transaction turns that vision into reality and provides the opportunity for significant value gain through delivering the high level of synergies available and from the increased strength of the combined business. Being the leading regional operator in Spain, Euskaltel is very sensitive to the local needs in Asturias and we know will provide great support to the Telecable business and team. We look forward to working closely with the Euskaltel Board and the team as we together define the next exciting chapter of Euskaltel's and Telecable's development".
Euskaltel - Communication