Vodafone Share Price Fell 1.73% on the €5bn Sale of Vodafone Spain

The Vodafone Group plc (LON: VOD) share price fell 1.73% after announcing that it had signed a binding agreement with Zegona Communications plc to sell 100% of Vodafone Spain. The company attributed the sale to the unit's poor performance, as it had struggled with structurally low returns.

Upon completion of the agreement, Vodafone is set to receive substantial consideration, which includes a minimum of €4.1 billion in cash, alongside the potential of up to €0.9 billion provided in the form of Redeemable Preference Shares (RPS). 

The RPS are designed to be redeemed within six years of the transaction's closing, comprising the subscription price and any accrued preferential dividends. The total enterprise value of this transaction amounts to a substantial €5.0 billion; an evaluation arrived at through rigorous financial analysis. 

In addition to the above, a strategic agreement has been established between Vodafone and Zegona, outlining the provision of specific services by Vodafone to Vodafone Spain. 

The arrangement comes with an annual service charge of approximately €110 million, further enhancing the value of the transaction and solidifying the partnership between the two entities.

This strategic move by Vodafone underscores its commitment to optimising its portfolio and financial structure while aligning with its long-term business strategy.

Zegona has secured substantial debt facilities amounting to a maximum of €4.2 billion, strategically earmarked to fulfil the cash consideration as part of the Transaction. In addition, Zegona is actively planning to raise equity by offering new Zegona shares to institutional investors through an institutional placing. 

Margherita Della Valle, Vodafone’s Chief Executive, said: “The sale of Vodafone Spain is a key step in right-sizing our portfolio for growth and will enable us to focus our resources in markets with sustainable structures and sufficient local scale. I would like to thank our entire team in Spain for their dedication to our customers and relentless determination to improve our organic performance. However, the market has been challenging with structurally low returns. My priority is to create value through growth and improved returns. Following the recently announced transaction in the UK, Spain is the second of our larger markets in Europe where we are taking action to improve the Group's competitiveness and growth prospects.”

Vodafone share price. 

The Vodafone share price spiked higher, then fell 1.73% to trade at 75.245p from Monday’s closing price of 76.570p.