CK Hutchison Holdings and VimpelCom agreed to form a 50:50 joint venture that will own and operate their respective mobile businesses in Italy, hailing the transaction as the largest M&A deal in Italy since 2007 with a total value of €21.8 billion ($23.8 billion).
The new entity will bring together Three Italy and Wind to create a combined company with more than 31 million mobile and 2.8 million fixed-line subscribers in Europe's fourth-largest telecoms market, competing with Telecom Italia and Vodafone Italy. The companies expect the deal to take around 12 months to complete, assuming regulatory approval is obtained.
The two companies, which first announced they were in negotiations in May, said the combined business is expected to generate cost savings of more than €5 billion, largely through combining the two mobile networks. The combined revenue of the companies in the 2014 financial year was €6.4 billion. The deal value comprises €13.9 billion from Wind Acquisition Holdings Finance (WAHF) -- the holding company of Wind -- and €7.9 billion from Three Italia.
The new joint venture holding company will be called Hutchison 3G Italy Investments, of which CK Hutchison and VimpelCom will each indirectly hold 50 per cent. After the transaction is completed, there will be no additional obligations to contribute funds by either parent company.
Maximo Ibarra, the current CEO of Wind, will take the helm of the new combined business. Vincenzo Novari, the current CEO of Three Italia, will be appointed as senior adviser for Italy to CK Hutchison and will serve as a CK Hutchison nominee on the joint venture's board.
Dina Ravera, Three Italia's COO, will lead the merger integration process and will remain in a senior operating role in the combined business. Stefano Invernizzi, current CFO of Three Italia, will become CFO of the combined business.
Canning Fok, co-group managing director of CK Hutchison, said the combination of Three Italia and Wind would create a financially sound and efficient operator that is able to compete head-on in the market place. "This joint venture will give the combined business the scale and strength to offer Italian consumers and businesses a state of the art network with greater 4G coverage and higher speeds," he added.
CK Hutchison was formed earlier this year as part of the reorganisation of the ownership structure of the Hutchison Whampoa telecoms group. The Hong Kong-based company is also in the process of buying O2 UK from Telefónica, and only recently completed the acquisition of O2 Ireland from the Spanish group. It also previously acquired Orange Austria.
- see this release
Report: VimpelCom and Hutchison near deal on Italian merger
Hutchison and VimpelCom hold 'exploratory' talks on Italian joint venture
Telecom Italia hails first profit in 3 years; seeks up to €2B in bond issue
Report: Wind Italy launches refinancing of €1.8B loan after agreeing tower sale
Three Group to explore opportunities for further growth
Hutchison Whampoa owner restructures group to improve value