European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Telxius, a subsidiary of <a href="https://www.smartkarma.com/entities/telefonica-sa" target="_blank" data-smartkarma-citation="entities:21299:1" rel="noopener">Telefonica SA (TEF SM)</a> (50% Telefonica, 40% KKR, 10% Pontegadea) reached an agreement with Boston-based <a href="https://www.smartkarma.com/entities/american-tower-corp" target="_blank" data-smartkarma-citation="entities:6365:1" rel="noopener">American Tower (AMT US)</a> to sell its entire tower unit (30,722 sites across Argentina, Brazil, Chile, Germany, Peru and Spain).
<ul>
<li>The EV is €7.7 bn including the remaining payments to be done by Telxius to <a href="https://www.smartkarma.com/entities/telefonica-deutschland-holding" target="_blank" data-smartkarma-citation="entities:21687:1" rel="noopener">Telefonica Deutschland Holding (O2D GR)</a> to complete the German transaction.</li>
<li>The price is 30.x EBITDA, above the usual 23x.</li>
<li>Telefónica will reduce its debt by €4.6 bn, 12.5% of the total.</li>
<li>Debt reduction and pending corporate operations provide the group with sufficient liquidity to maintain its commitment to shareholders for the time being.</li>
</ul>
In the current context, Telefonica focuses on the management of FCF to preserve the payment of the dividend, by reducing investments. The dividend remains at €0.4 per share and debt, one of the group's main drawbacks, fell c.15% LTM. In the long term, the potential for structural growth is low, competition high, and room to maneuver limited. The current environment makes it difficult to sell non-strategic assets at adequate prices and questions the sustainability of the dividend.
<h3>Recommendation</h3>
Telefonica: DCF valuation is €4.2 (Capital IQ consensus, WACC 6.4%, g 0.3%).
<ul>
<li>The sale of Telxius may support market expectations for a potential acceleration in the execution of the strategic reshuffle announced by management, thus leading to a re-rating of the company.</li>
<li>But there are risks: slower deleverage, lower economic growth in Spain (24% of EBITDA), macro deterioration and currency depreciations in Central and South America (c. 15% of EBITDA). Positive surprises may come from further disposals at high multiples thus leading to faster deleverage, better than expected economic growth in Central and South America and a reduction of the (so far unsustainable) dividend.</li>
</ul>
Cellnex, reiterate TP of €64.36. Cellnex could become the object of a take-over.

Telxius, a subsidiary of Telefonica SA (TEF SM) (50% Telefonica, 40% KKR, 10% Pontegadea) reached an agreement with Boston-based American Tower (AMT US) to sell its entire tower unit (30,722 sites across Argentina, Brazil, Chile, Germany, Peru and Spain).

The EV is €7.7 bn including the remaining payments to be done by Telxius to Telefonica Deutschland Holding (O2D GR) to complete the German transaction.
The price is 30.x EBITDA, above the usual 23x.
Telefónica will reduce its debt by €4.6 bn, 12.5% of the total.
Debt reduction and pending corporate operations provide the group with sufficient liquidity to maintain its commitment to shareholders for the time being.

In the current context, Telefonica focuses on the management of FCF to preserve the payment of the dividend, by reducing investments. The dividend remains at €0.4 per share and debt, one of the group's main drawbacks, fell c.15% LTM. In the long term, the potential for structural growth is low, competition high, and room to maneuver limited. The current environment makes it difficult to sell non-strategic assets at adequate prices and questions the sustainability of the dividend.
Recommendation
Telefonica: DCF valuation is €4.2 (Capital IQ consensus, WACC 6.4%, g 0.3%).

The sale of Telxius may support market expectations for a potential acceleration in the execution of the strategic reshuffle announced by management, thus leading to a re-rating of the company.
But there are risks: slower deleverage, lower economic growth in Spain (24% of EBITDA), macro deterioration and currency depreciations in Central and South America (c. 15% of EBITDA). Positive surprises may come from further disposals at high multiples thus leading to faster deleverage, better than expected economic growth in Central and South America and a reduction of the (so far unsustainable) dividend.

Cellnex, reiterate TP of €64.36. Cellnex could become the object of a take-over.

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

A trio of PE funds - KKR, Cinven, and Providence - have launched a takeover bid to acquire a majority stake in Spanish telecom operator MásMóvil Ibercom, S.A. If the Deal goes through, all three PE firms will hold an equal stake in the company. The Offer Price is EUR22.50/share valuing the company at a market cap of ~EUR3.0bn and an enterprise value of EUR 5.011bn.Providence is currently the second-largest shareholder with (9.16%) and including them, shareholders collectively holding 29.56% have agreed to sell. However, the Deal has a minimum acceptance condition of 50% and MásMóvil's shares are currently trading above terms at EUR23.18. In this insight, we take a look at the fundamentals to see if a bump/overbid is justified.

A trio of PE funds - KKR, Cinven, and Providence - have launched a takeover bid to acquire a majority stake in Spanish telecom operator MásMóvil Ibercom, S.A. If the Deal goes through, all three PE firms will hold an equal stake in the company. The Offer Price is EUR22.50/share valuing the company at a market cap of ~EUR3.0bn and an enterprise value of EUR 5.011bn.Providence is currently the second-largest shareholder with (9.16%) and including them, shareholders collectively holding 29.56% have agreed to sell. However, the Deal has a minimum acceptance condition of 50% and MásMóvil's shares are currently trading above terms at EUR23.18. In this insight, we take a look at the fundamentals to see if a bump/overbid is justified. 

Masmovil: Target Shareholders Looking for a Bump

M&A Reporting, CTFN

Jonathan Spitzer

M&A Reporting

CTFN

Bringing the marketplace leading coverage of mergers, events, and major corporate actions, CTFN has a team of seasoned reporters from Los Angeles to London, publishing news that advances stories that matter to event-driven investors and deal professionals.

Telefónica is actively assessing alternate options to reduce its €50 billion debt pile in case its agreed £10.3 billion sale of U.K. mobile business O2 to CK Hutchison’s Three fails to gain European Commission approval, various sources told CTFN.

Telefónica is actively assessing alternate options to reduce its €50 billion debt pile in case its agreed £10.3 billion sale of U.K. mobile business O2 to CK Hutchison’s Three fails to gain European Commission approval, various sources told CTFN.

Telefónica Running Rule over Plan B to O2 Sale

Germany

Telefonica Deutschland Holding AG provides telecommunications services in Germany. The Company offers fixed-line and mobile telephone, Internet, and data transmission services to residential and corporate customers.

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Telefonica Deutschland Holding (O2D GR)

Telefonica's Disposal of Telxius

Telefonica manages FCF to preserve the divi, by reducing investments. Debt fell c.15% LTM. Structural growth potential is low, competition high,...

Jesus Rodriguez Aguilar

Masmovil: Target Shareholders Looking for a Bump

A trio of PE funds - KKR, Cinven, and Providence - have launched a takeover bid to acquire a majority stake in Spanish telecom operator MásMóvil...

Janaghan Jeyakumar, CFA

Telefónica Running Rule over Plan B to O2 Sale

Telefónica is actively assessing alternate options to reduce its €50 billion debt pile in case its agreed £10.3 billion sale of U.K. mobile...

CTFN

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