Vodafone Rejects $13 Billion Italy Bid From Iliad, Apax

(Bloomberg) -- Vodafone Group Plc has rejected an 11.25 billion-euro ($12.9 billion) offer for its Italian unit from a consortium backed by billionaire Xavier Niel’s Iliad SA. 

The approach was “not in the best interests of shareholders,” Vodafone said in a statement Thursday, which confirmed an early Bloomberg News report it was leaning toward spurning the proposal. It also revealed that Iliad’s approach involved private equity firm Apax Partners LLP as a co-bidder.  

“Vodafone continues to pragmatically pursue several value accretive in-market consolidation opportunities to deliver sustainable market structures in its major European markets, including Italy,” the British carrier said.

Vodafone viewed the proposal as too low, people familiar with the matter said earlier. While Vodafone is keen to participate in any Italian consolidation, it believes the potential synergies that Iliad could extract from a combination would warrant a higher price, according to the people. 

Iliad said it would “pursue its standalone strategy” in a responding statement, a suggestion it won’t increase its bid. The statement also confirmed its offer value, after Bloomberg first reported the approach on Monday. Paris-based Iliad said it was a “very high premium” of 100% cash, and it had strong financial support from a top European bank. 

Shares of Newbury, England-based Vodafone were down 1.4% at 4:26 p.m. in London, shedding earlier gains after Iliad’s statement and giving it a market value of about 37.2 billion pounds ($50.7 billion). 

Fierce Competition

Vodafone is looking for merger opportunities in the U.K., Spain, Italy and Portugal, Chief Executive Officer Nick Read said last week. His comments came after activist investor Cevian Capital AB built up a stake in the telecom operator and began lobbying for changes. 

Options to boost value at Vodafone could include consolidating its presence in key markets, selling some operations or pursuing stock buybacks, people with knowledge of the matter have said.

“Iliad’s reported 11 billion-euro offer for Vodafone’s Italian operation is too low, we think, to convince the carrier to exit a key market that accounts for 11% of sales,” said Bloomberg Intelligence analyst Erhan Gurses. “The price equates to 6.4x EV/Ebitda after leases vs. Vodafone’s 6.5x trading multiple and doesn’t reflect a fair share of significant synergy and consolidation benefits.”

Europe’s major telecoms firms are racing to consolidate after years of low margins and increased pressure from investors. Iliad moved into the Italian mobile services market in 2018 as a no-frills challenger, sparking a price war that last year led to three profit warnings by former monopoly Telecom Italia SpA. 

Italy is also one among the world’s most competitive markets for mobile services, with rivals including CK Hutchison Holdings Ltd.’s Wind Tre SpA venture already active.

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