Orange and MásMóvil have announced this Saturday an agreement to unite their operations in Spain, forming a 'joint venture' valued at 18,600 million euros, as reported by both entities in a statement.
If the competition authorities give the green light to the operation, the resulting company would become the largest telephone operator in Spain. Together, the two companies have 20 million mobile network customers and about 1.5 million TV customers.
Specifically, the resulting entity would take the form of a 'joint venture' controlled by Orange and Lorca JVCo, the British parent company of MásMóvil, 50%, with equal governance rights. The valuation of the joint entity is 18.6 billion euros, 7.8 billion euros for Orange Spain and 10.9 billion euros for MásMóvil. These are values that are below the 19,600 million established by the forecasts made in March, when the start of exclusive negotiations was announced.
In revenue, the new company would reach 7,300 million euros in turnover and an adjusted gross operating profit of around 2,200 million euros.
The operation is subject to the approval of the competition authorities, as well as other relevant authorities, and is expected to close in the second half of the year 2023, at the latest.
The statement from both entities highlights that the joint venture, which would unite complementary businesses such as those of MásMóvil and Orange, would lead to significant efficiencies, which "would allow the combined entity to accelerate investments in FTTH and 5G, which will be beneficial for consumers Spanish people".
The agreement between the parties includes a right to activate a Public Offer for Sale (OPV) under certain conditions agreed upon by both parties after a defined period and, in such scenario, Orange has the option to take control of the combined entity at the price of said Public Sale Offer (OPV).
The 'due diligences', which have been carried out since last March, have shown a potential for synergies of more than 450 million euros per year, from the fourth year after the closing of the operation.
In addition, the transaction is supported by a debt package of 6,600 million euros without recourse to the shareholder, which will finance, among other things, a payment of 5,850 million euros to the shareholders of Grupo Orange and MásMóvil.
In this sense, 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. This debt package is made up mainly of bank debt, provided by a 'pool' of banks. The existing debt of MásMóvil will remain in the new company.
The CEO of Orange, Christel Heydemann, believes that the creation of this new company is "of fundamental importance for the Orange Group, the Spanish telecommunications market and for our customers".
For his part, the CEO of MásMóvil, Meinrad Spenger, stressed that together with Orange they plan to form "a strong operator with a sustainable business model and the ability to invest in infrastructure, technology and talent worldwide." "We anticipate that this operation will foster competition, digitization and innovation in the Spanish market," he added.
