Orange to buy Spanish operator Jazztel

Orange announced today that the group will launch a friendly voluntary cash tender offer for the acquisition of 100 percent of the capital of Jazztel, a company listed in Spain.

Through this transaction, Orange will create the second biggest fixed-line broadband operator and one of the most dynamic players in the mobile segment in Spain, thereby accelerating the movement of its customers towards convergent offers. This operation will enable Orange to accelerate its growth in a highly-competitive market.

This offer will enable shareholders of Jazztel to receive 13 euros per share in cash, a premium of 34 percent compared to the volume weighted average closing price over the last 30 trading days. This offer values Jazztel at an enterprise value/EBITDA 2015-multiple of 8.6x(1)  after accounting for the synergies generated by the integration of the two entities.

The price of 100 percent of Jazztel’s capital amounts to 3.4 billion euros. The offer is conditional on the acceptance of at least 50.01 percent of Jazztel’s capital, excluding shares for which an irrevocable undertaking agreement has been signed.

The lead shareholder, Leopoldo Fernandez Pujals, who holds 14.5 percent of the capital, has made a commitment to participate in the offer. Other executive members of Jazztel’s board of directors, Jose Miguel Garcia Fernandez, CEO, and Jose Ortiz Martinez, general secretary have also agreed to the offer.

Jazztel is a major player on the Spanish telecom’s market and is one of the most dynamic competitors in the triple play and mobile services segments. This operation will generate estimated global synergies for the combined entity of up to 1.3 billion euros, in particular thanks to savings in operational expenditure and investments in networks.

In order to preserve its balance sheet strength, Orange SA will issue a combination of financial instruments: securities giving access to its share capital for a maximum amount of two billion euros and perpetual subordinated hybrid bonds. The equity credit of such a financing package, as granted by rating agencies, is planned to equal the total consideration eventually paid to Jazztel shareholders. Given the solidity of the Group’s balance-sheet, the cash tender offer is not conditional upon the obtention of financing.

This transaction remains subject to the approval of the relevant authorities.

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