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Vodafone’s multi-billion-euro towers deal is all about control

Vodafone has agreed a co-control deal for its Vantage Towers enterprise with International Infrastructure Companions (GIP) and KKR that would usher in money proceeds of as much as €7.1 billion.

A brand new three way partnership between Vodafone and the GIP/KKR partnership will take management of Vodafone’s current 81.7% stake in Vantage Towers. On the similar time, the JV will make a voluntary takeover supply for the excellent Vantage Towers shares, with one minority holder – RRJ Capital – having already agreed to cede its 2.4% stake.

It’s a fancy transaction, however the necessary level is that, relying on the take-up of the VTO and the dimensions of stake GIP/KKR finally ends up holding, Vodafone’s money proceeds will vary between €3.2 billion and €7.1 billion (see chart).

That’s not a sum to be sneezed at. To place the deal right into a extra relatable context, it offers Vodafone and the minority holders a valuation of €32 per share for Vantage Towers, which is a 19% premium on its most up-to-date three-month common and a rise of 33 p.c on its March 2021 IPO value of €24 per share. It confers an fairness worth of €16.2 billion on Vantage Towers, or an adjusted EBITDA a number of of 26x, which is roughly what we’ve seen in most towers offers of late. It’s an honest end result.

However in addition to being about cash, this transaction can also be about management, as we suspected.

Vodafone has been evaluating its choices for the enterprise for the previous few weeks, and it was fairly clear that retaining some stage of management could be excessive on its agenda. Certainly, final week Bloomberg reported that GIP and KKR have been main the race to purchase into Vantage, regardless of a rival bid from passive infrastructure specialist Cellnex. It was a reasonably protected guess that the latter’s want for operational management would freeze it out, as was the case with its aborted try to purchase into Deutsche Telekom’s GD Towers unit again in July.

Like Deutsche Telekom, Vodafone clearly needs to maintain some pores and skin within the towers sport.

“This transaction efficiently delivers on Vodafone’s acknowledged goals of retaining co-control over a strategically necessary asset, deconsolidating Vantage Towers from our stability sheet to make sure we are able to optimise its capital construction and generate substantial upfront money proceeds for the Group to help our precedence of deleveraging,” stated Vodafone chief government Nick Learn.

Additional, the telco made it clear that it and the GIP/KKR consortium can have balanced governance rights within the JV and equal voting rights. Vantage Tower’s present management staff will stay as is.

The deal is about Vantage Tower’s development prospects as a lot as it’s about Vodafone’s want to usher in some money.

As chief government Vivek Badrinath made clear when the towers enterprise was spun out of Vodafone two years in the past, Vantage Towers has loads of headroom for rising its tenancy ratio, in addition to its footprint. It has made some progress on that rating, inking a cope with Germany’s 1&1 on the again finish of final 12 months being a first-rate instance, however there may be extra development to be captured within the European towers house.

“We’re delighted to hitch forces with Vodafone and KKR to put money into Vantage Towers, a high-quality European tower portfolio with robust upside potential,” stated Will Sensible, Companion and Head of Digital Infrastructure at GIP. “We’re wanting ahead to capturing the thrilling value-creating alternatives within the European telecoms infrastructure sector by advancing Vantage Towers’ technique and supporting its capability to construct new websites.”

In the meantime, Vincent Policard, Companion and co-Head of European Infrastructure at KKR, made comparable remarks, in addition to addressing the query of inorganic development.

“At KKR we’re long-term conviction buyers in Europe’s digital infrastructure and at Vantage Towers we intend to pursue value-creating investments to capitalise on the expansion on this sector and to assist drive consolidation in a fragmented market,” he stated.

That feels like a robust trace at future M&A.


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