Marwyn investment Zegona sells Telecable – Directors of Marwyn Value Investors Limited welcome the announcement made yesterday by its investee company, Zegona Communications plc (“Zegona”) confirming the completion of the sale of Zegona’s Spanish cable business, Telecable to Euskaltel, S.A.
- The transaction has generated significant upfront cash proceeds and Zegona intends promptly to return up to £140m to shareholders, representing 71p per share (44% of Zegona’s market capitalisation).
- It plans to return capital through a tender offer conducted by an intermediary. Full details of the offer and the required general meeting3 will be set out in a circular to be sent to shareholders
- Targeted 2017 dividend reconfirmed, £9.8m total pay-out (equivalent to 5p per existing Zegona share)
- Total cash return to Zegona shareholders from the proposed tender offer and dividends to the end of 2017 equals 55% of initial equity invested, whilst still retaining exposure to underlying Euskaltel cash flows of similar magnitude to Telecable standalone
Zegona sees potential to drive additional value through its 15% shareholding in Euskaltel
- Acquisition of Telecable establishes Euskaltel as the leading integrated telecoms operator in northern Spain with €711m Revenues, €346m EBITDA and €224m Cash Flow. Euskaltel’s increased scale and strong cash generation create a robust platform for growth
- Substantial synergies available, valued by Euskaltel at €245m, equivalent to €1.37 per Euskaltel share
- Opportunity to close the current Euskaltel value gap – Euskaltel trades at an Equity Free Cash Flow yield of 12%, versus European Cable average of 5%
- Euskaltel Board strengthened by addition of Robert Samuelson (Zegona COO) and Jon James (ex ComHem COO)
- Zegona expects to help drive Euskaltel performance improvement, leveraging its influence at the Euskatel Board and newly formed Strategy Committee10 and its positive relationship with Euskaltel’s largest shareholders
- Zegona has the right to distribute Euskaltel stock to its shareholders without any lock-up and will continuously evaluate its investment position with the objective of optimising risk adjusted returns to shareholders
Zegona has also confirmed its intention to return GBP140 million to its shareholders by way of a tender offer, details of which are yet to be released. The Company will issue a further announcement in due course following confirmation by Zegona of the details of the tender offer.
At the date of this announcement, funds managed by Marwyn Asset Management Limited own 25.8 per cent. of the issued share capital of Zegona, of which the company indirectly holds approximately 21.3 per cent. of the issued share capital of Zegona.
MVI : Marwyn investment Zegona sells Telecable