Pressure mounts on Vodafone as Ono plans stock listing

February 13, 2014 - 12:09:04 am
MADRID/LONDON: Spain’s largest cable operator, Ono, said it was pressing ahead with its plan for a stock market sale, putting pressure on Britain’s Vodafone  to raise its takeover proposal. 

Ono, which sells fixed and mobile phone, TV and Internet services, has been preparing a ¤7bn ($9.6bn) listing to capitalise on strong investor interest in European cable firms. But Vodafone has approached its private equity owners with a takeover offer, sources familiar with the matter said this week, seeking to create the biggest rival to Spanish telecoms market leader Telefonica. 

Ono said yesterday its board did not discuss any takeover proposal at a meeting on Tuesday. 

Its shareholders will now attend their annual meeting on March 13 to give formal approval for an initial public offering (IPO), meaning Vodafone is likely to get a couple of weeks to decide whether to increase its price. 

“We believe that the acceleration of the IPO may tip the scales in terms of forcing the hand of possible bidders in making up their mind before the IPO, or risk having to pay higher multiples in the future for a takeover,” said JB Capital Markets in a note to clients. A potential competing bidder, US-based Liberty Global  controlled by billionaire John Malone, has also expressed an interest in Ono, a person familiar with the situation has said.

Private equity funds Providence Equity Partners, Thomas H Lee Partners, CCMP Capital Advisors and Quadrangle Capital own 54 percent of Ono. 

Analysts said the situation was reminiscent of the stock market sales of European cable operators Kabel Deutschland and Ziggo that were subsequently taken over by Vodafone and Liberty, respectively, at higher prices. 

Espirito Santo, in a note to clients, said it still saw Vodafone as the most likely buyer as it could extract greater cost and other benefits from a combination with Ono than Liberty could. 

Vodafone has been hit hard in Spain in recent years, where  Telefonica has turned the market ultra competitive by folding the four services of mobile, fixed-line, broadband and pay-TV into one cheaper offering for cash-strapped consumers. 

The bid by Vodafone — its second after a first offer was rejected — fits with its new strategy of using some of the proceeds from the $130bn sale of its US arm to invest in its core European networks to allow it to offer bundled services to consumers and offload traffic from its mobile networks. 

In Spain, where a long recession has reduced the sums consumers are willing to pay for telephony, Vodafone has been working with Orange to build a fibre network in major cities to offer a wider range of services. 

A deal for Ono could work well as the Spanish company is more focused in smaller cities and rural areas and analysts say it would be a stronger fit than with Liberty. One source, who had been briefed on the Ono board’s discussions, said the directors had agreed to first carry out a capital increase of ¤800m and later sell existing shares for a total of at least ¤200m. Ono believes it has an enterprise value of around ¤7bn, including debt worth ¤3.4bn. Based on this price, about 25 percent of the company would float on the stock exchange after the listing, the source said. Reuters
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