Orange has launched a "friendly" offer worth €3.4 billion ($4.4 billion) for 100 per cent of fixed broadband provider Jazztel, as the France-based operator seeks to build up its fixed assets in the highly competitive Spanish market.
Jazztel President Leopoldo Fernandez Pujals
Buying Jazztel will put Orange on a more level playing field in a market where bundles of fixed and mobile services have become a dominant play. Telefónica already offers a strong quad-play proposition with the Movistar Fusion bundles of fixed and mobile voice and data services combined with TV, while Vodafone Spain has enhanced its position with the recent acquisition of Spanish cable operator Ono.
"Through this transaction, Orange will create the second-biggest fixed-line broadband operator and one of the most dynamic players in the mobile segment in Spain, thereby accelerating the movement of its customers towards convergent offers," Orange said in a statement. "In an economic context that has continued to recover, this operation will enable Orange to accelerate its growth in a highly competitive market."
According to analysts from IHS, a merger of Orange and Jazztel would create an operator controlling 25 per cent of the Spanish broadband market.
"The acquisition of Jazztel would add 2.2 million homes passed with fibre-to-the-home capability. The acquisition of Jazztel would also boost Orange's mobile business with 1.5 million MVNO customers," IHS analysts added.
Orange noted that the offer values Jazztel at 8.6 times EBITDA estimated for 2015, "after accounting for the synergies generated by the integration of the two entities." Orange estimates that the combined entity will generate synergies of up to €1.3 billion, in particular due to savings in opex and network investments.
The offer, which is subject to approval from UK and Spanish competition authorities, is also conditional on the acceptance of at least 50.01 per cent of Jazztel's capital, excluding shares for which an irrevocable undertaking agreement has been signed. Orange said leading shareholder Leopoldo Fernandez Pujals, who holds 14.5 per cent of the capital, has made a commitment to participate in the offer. Jazztel CEO José Miguel Garcia Fernandez and general secretary José Ortiz Martinez have also agreed to the offer.
IHS also noted that Jazztel had been in discussions with TeliaSonera over a potential acquisition of mobile operator Yoigo.
"In the short term, this merger is off as part of a condition of Orange's takeover. In the longer-term IHS expects Orange to re-evaluate an acquisition of Yoigo, following its integration with Jazztel," the analysts said.
- see this Orange release
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