Orange mulls acquisitions opportunities in Spain; open to Euskaltel tie-up
Orange [EPA:ORA], the French telecoms company, could still consider acquisition opportunities in Spain including a tie-up with Euskaltel[BME:EKT] if it comes up for sale, said four sources familiar with the situation.
On 21 January, in a statement published on the Spanish stock-market regulator CNMV's website, Orange said that “it was not analysing a 100% acquisition of Spanish telecommunications operator Euskaltel but that it was always analysing options for growth in Spain.”
Orange was ready to consider a tie-up combination with Euskaltel, including a minority stake acquisition, but the shareholders of the Spanish group were opposed to a sale, a first source familiar explained.
However, should Euskaltel shareholders come up with a tie-up proposal, it is clear Orange will consider it, this source added. Euskaltel is not a target for Orange at the moment, this source stressed.
Euskaltel shareholders seem reluctant to a 100% acquisition by Orange but they might not necessarily turn down a minority stake sale, a second source familiar suggested.
The cable company is based in Spain's Basque Country. Management, 21.3% shareholder Kutxabank and the regional establishment are more keeping the group’s Basque identity rather than realizing all its value through an aggressive but dilutive strategy, this news service wrote last October.
Euskaltel is capitalized at EUR 1.42bn. At the end of last year, its 15% shareholder Zegona Communications [LON:ZEG] said that its board decided to call off an offer for a further 14.9% of the cable company due to difficulties financing a partial bid. It also allied with Talomon Capital, which currently owns 1.3%. Although both parties want to buy shares in the market, they said that they had yet to do so on 28 January.
Kutxabank could not be reached for comment. Zegona declined to comment.
Orange has repeatedly denied being interested in Euskaltel since the takeover rumours emerged last month, a third source familiar with the situation said. The rumours surrounding Orange’s interest pushed Euskaltel’s share price-up, and as a result worked against Zegona’s plan to buy more shares, this source added.
Spain is one of the largest markets in Europe and Orange is well positioned there. It would then make sense to look for growth opportunities as there are no substantial growth opportunities in France, two of the sources agreed.
In Spain Orange bought Jazztel in 2014 and sat out the next round of consolidation as it focused on integration issues, as reported.
Although Orange’s statement left the door open to some kind of deal with Euskaltel that falls short of a takeover, many in the market remain unconvinced. The two companies are unlikely to find any common ground, said a second sector banker, two sector lawyers and a fourth source familiar with the situation.
Any deal with Orange could lead to some negative synergies in areas such as television rights, added the third source.
According to a Santander analyst report, negative synergies could arise from football rights and remedies that would fully offset any potential synergies.
Orange generated a EUR 41.09bn in 2017 with an adjusted EBITDA of EUR 12.8bn and an operating cash flow of EUR 5.6bn according to a company statement.
Orange had a EUR 7.2bn available in CAPEX to invest network quality and customer experience. In Spain where the group generates 12.9% of its overall revenues (vs. 42% in France), it achieved "record” revenue growth in 2017, up 7.1% and adjusted EBITDA up 17.0%, the company statement read.
A spokesperson for Orange declined to comment. Euskaltel declined to comment.