Vodafone Group Deal With Ono Reportedly Completed

vodafoneBy Kj1595 (Own work) [CC BY-SA 4.0 or Public domain], via Wikimedia Commons

Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) upped its takeover offer for Grupo Corporativo Ono SA as Reuters is reporting they have reached an acquisition deal.

On March 5, Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) had upped the takeover ante to nearly 7 billion euros or $9.7 billion dollars. This deal was rebuffed by Ono and its private equity owners.  54% percent of the company is owned by PE firms Providence Equity Partners, Thomas H. Lee Partners, CCMP Capital Advisors, and Quadrangle Capital.  Ono, with 1.9 million customers, sells fixed and mobile phones, TV and Internet services and had decided to move forward with an initial public offering.

Meeting took place yesterday, with due diligence over the weekend

Sources quoted in the report said a meeting took place yesterday between the shareholders and Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) Chief Executive Vittorio Calao.  The due diligence is expected to start this weekend in order to make the offer binding.

Action expected

Action is expected to take place before March 13, the date the cable group is due to go ahead with the plan to list the IPO on the Madrid stock exchange.

Covering 70 percent of the market in Spain, Ono has built the network later than other cable and telecom companies and has fast broadband speeds of up to 200 megabits per second, or up to 20 times the average speeds of competitor networks, according to the report.

Vodafone’s third fixed broadband acquisition in Europe

The purchase of Ono is the third acquisition in fixed broadband in Europe for Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) in two years. The acquisitions have the goal of boosting Vodafone’s European network. It recently divested in the US to focus on Europe with the $130 billion sale of its U.S. division and may have dry powder for additional purchases. Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) CEO Vittorio Colao indicated they have the capacity to do another $30 billion to $40 billion in acquisitions in coming years, boldly noting that no deal would be too big if it makes strategic sense.

The competition for the remaining firms is heating up. Europe’s top cable operator, Liberty Global, recently paid 11.3 times EBITDA for Dutch rival Ziggo NV (AMS:ZIGGO), while Vodafone paid 11.9 times EBITDA for Kabel Deutschland last year, according to the report.  Ono had EBITDA of 752 million euros for 2012, so applying an 11 times multiple on it would translate to a Vodafone bid of around 8.2 billion euros, slightly above the current offer. Cable sector firms typically have a value of multiple of 9.4 times EBITDA, according to the report.

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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