Vodafone Group, together with Apax Partners Midmarket and Fortino Capital, announced an agreement to combine broadband, cable and pay TV company Melita and Vodafone Malta.
Under the terms of the transaction, Vodafone Malta, the country's largest mobile operator, operating a 4G mobile network covering 99% of the Maltese population, will be combined with Melita, the largest provider of cable, broadband and pay TV services with a network covering 99% of Maltese households. Melita offers a range of content and high speed broadband with download speeds of up to 250 Mbit/s.
The transaction values Vodafone Malta at an enterprise value of Euro 208 million, and values Melita at an enterprise value of Euro 298 million. At completion, the shareholders of Melita will own 51% of the combined company and Vodafone Europe, the current shareholder of Vodafone Malta, the remaining 49%2. The combined entity will have net debt of approximately Euro 345 million and Vodafone will receive an estimated cash payment of Euro 120 million, with Melita shareholders receiving an estimated cash payment of Euro 33 million.
On closing, the combined company's mobile and enterprise business will operate under the Vodafone brand and will offer a range of solutions, including Vodafone's portfolio of products and services, as well as having access to Vodafone's expertise and capabilities in mobile and fixed operations.
The combination will establish a new integrated communications company with the scale and resources to deliver quad play bundled mobile, fixed broadband, fixed telephony and TV services to consumers and a range of enterprise services for businesses and the public sector in Malta. Vodafone noted that the new company will be better positioned to compete with the integrated incumbent Maltese operator GO.The combined company expects to realise cost synergies through the rationalisation of duplicated activities and improved network investment efficiency as the company begins to introduce 4.5G, and in the future 5G, mobile networks and gigabit-capable fixed networks.
For the year ended December 31, 2016, Vodafone Malta generated Euro 30 million of underlying EBITDA and Euro 14 million of underlying operating free cash flow; for the financial year ended March 31, 2016 Vodafone Malta generated a pre-tax profit of Euro 11 million. For the twelve months ended December 31, 2016, Melita generated Euro 33 million of underlying EBITDA and Euro 20 million of underlying operating free cash flow.
The Melita shareholders intend to appoint the current CEO of Melita, Harald Rösch, as CEO of the combined company and Vodafone intends to appoint the current CFO of Vodafone Malta, Caroline Farrugia, as CFO.
The transaction, which requires approval from the Malta Competition and Consumer Affairs Authority, is currently expected to close in the second half of 2017.
