Orange Spain and the MásMóvil Group (Lorca JVCO) announced this Saturday the merger of operations, which means the creation of the largest Spanish telecommunications company by number of customers, over 31 million lines between mobile and fixed broadband . Telefónica Spain will retain its number one position in the Spanish ranking for revenue and EBITDA, according to data from the last quarter
According to the terms of the agreement, the capital of the new company will be divided equally between both groups, with an asset valuation of . Of that amount, 7,800 million euros corresponds to Orange Spain and 10,900 million to MásMóvil, including some 6,600 million debt from the yellow group.
The president and financial manager will be the responsibility of Orange, while the position of CEO will correspond to the chief executive of the MásMóvil Group, Meinrad Spenger.
The merger of Orange Spain and MásMóvil will not initially have an impact on the customers of the different brands of both groups (Orange, Jazztel Simyo, on the one hand, and MásMóvil, Yoigo, Pepephone, Lebara, Llamaya, Lycamobile, Virgin, Euskaltel, on the other R, Telecable, Guu and Hitsmobile). All these banners will continue to operate as to date, regardless of the corporate identity of the new joint venture.
In the sights of the new company, the landing on the stock market in 2025 stands out, through a public offer for sale (OPV), at which time the venture capital funds that control the capital of MásMóvil -KKR. Cinven and Providence Equity- will have the opportunity to value an investment of approximately 5,300 million euros made in November 2020. As of the aforementioned IPO, Orange has reserved the right to take control of the joint venture, without that decision is binding.
From now on, the reinforced company begins its particular pilgrimage with the European competition authorities, whose journey could be concluded during the second half of 2023. In the best of cases, the regulators will give their particular approval with conditions , which will give rise to compensation from the resulting company to the rest of the operators, including alternatives such as Adamo and Avatel.
The work of those responsible for Orange and MásMóvil has been intensive since long before the beginning of the merger agreement was announced on March 8, with the consequent period of exclusive negotiations. In this way, in the last four months, the companies have had time to review in detail the accounts of the opponents (due diligence). In addition, the due diligences have revealed a potential for synergies of more than 450 million euros per year from the fourth year after closing the operation.
They have also reached an agreement with twenty banks to formalize a financing of 6,600 million euros. This figure will finance, among other issues, a payment of 5,850 million euros to the shareholders of both groups. In the pool of financiers there are entities such as Banco Santander, BBVA, CaixaBank and Banco Sabadell, BNP Paribas, Crédit Agricole, Société Generale and Natixis. In addition, the debt of 6,600 million of MásMóvil will be maintained, so the resulting group will be born with a liability of 13,200 million euros.
In recent months, the initial valuations of both groups have also been adjusted, so that the value of Orange Spain is set at 7,800 million euros (7.2 times EBITDA of 2022) and at 10,900 million euros (8.7 times the 2022 EBITDA) that of MásMóvil (including Euskaltel), including the aforementioned debt of 6,600 euros. “This distribution to shareholders will be asymmetric, since it implies the rebalancing of the equity value in favor of Orange to reflect the different levels of indebtedness of the two companies separately.” After the closing, the financial policy agreed between Orange and Lorca JVCO includes a leverage target of 3.5 times the net debt/EBITDA ratio to facilitate an IPO of the joint venture in the medium term.