Vodafone Seeks $2.4 Billion From Vantage Towers IPO

(Bloomberg) -- Vodafone Group Plc is looking to raise 2 billion euros ($2.4 billion) from an initial public offering of its European mobile-phone towers unit in Frankfurt, in what will be one of the region’s biggest stock market listings this year.

The U.K. telecommunication giant plans plans to sell shares in Vantage Towers AG at 22.50 euros to 29 euros apiece, according to a statement Tuesday. Vodafone is targeting maximum proceeds of 2.8 billion euros from the offering, which would include an option to increase the deal size and an over-allotment. The final number of shares sold will depend on where the IPO prices. Vodafone shares climbed 2% to 128.60 pence at 11:18 a.m. in London.

Vantage has gathered enough investor demand to cover the full deal size of its offering, according to terms seen by Bloomberg.

Two investment funds, Digital Colony and RRJ, agreed to buy 500 million euros and 450 million euros of stock, respectively, in the offering, which will run through March 17. The new stock will start trading on March 18. The IPO values Vantage at as much as 14.7 billion euros. Vodafone will use the proceeds to pay down some of its debt pile, the company has said.

The presence of cornerstone investors makes the remaining shares more scarce and could help push pricing for Vantage’s IPO into the upper half of the range, New Street Research analyst James Ratzer said by email, adding that they also pose a risk to the company’s liquidity for other shareholders.

Vodafone and other European carriers, hit by increasing competition, regulations and the Covid-19 pandemic, are looking to squeeze value from their mast and fiber assets. The push to roll out fifth-generation networks is also driving demand for more tower capacity, fueling a wave of consolidation and restructuring.

And for yield-hungry investors, these assets promise steady returns as tower companies typically sign long-term contracts, linked to inflation, for the space they rent out to mobile operators. Vantage plans to pay out 60% of recurring free cash flow annually in dividends, and intends to distribute 280 million euros in July for this financial year, the company said last month.

Still, mobile carriers looking to rent capacity from Vantage are direct competitors of the tower company’s majority shareholder and main customer across geographies: Vodafone. Independent European mast operators like Cellnex Telecom SA don’t have this drawback.

Vantage would be the biggest European IPO since InPost SA’s in January. Vantage’s blockbuster offering will put Germany’s IPO market on track for its best year since 2018, according to data compiled by Bloomberg. And a slew of other offerings are being considered, ranging from units being carved out of large conglomerates such as Volkswagen AG and Daimler AG to much potential listings from younger companies.

Language app Babbel and ProSiebenSat.1 Media SE-owned dating platform ParshipMeet are eyeing IPOs, Bloomberg News reported last month. Listings for open-source software developer SUSE, online eyewear retailer Mister Spex, cybersecurity provider Utimaco GmbH, prosthetic limb maker Ottobock SE & Co. and e-commerce site About You GmbH are also said to be in the works.

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