Euskaltel Case Study
Timeline
July 2015
Zegona acquires Telecable, a Spanish telecommunications service provider, for €640mn.
August 2017
Receives 15% stake in Euskaltel
Zegona became a 15 percent stakeholder in Euskaltel through the sale of Telecable and appointed one member to the Board of Directors of Euskaltel
April 2019
Increases stake and initiates change
Zegona increased its stake from 15 percent to approximately 21 percent, raising and investing more than £100 million to become the largest Euskaltel shareholder.
Eamonn O’Hare and Robert Samuelson are appointed to the Board of Euskaltel and initiate proactive improvement strategy, including the launch of the national Virgin Telco brand.
2021
Receives takeover bid at a 26% premium
MásMóvil Ibercom, S.A.U. (a wholly owned subsidiary of MásMóvil) announced an offer to acquire Euskaltel at an enterprise value of €3.5 billion at a significant premium to European telecommunications multiples.
Zegona realised a return on EKT Net Invested Capital of 87 per cent. for its shareholders, since 2015 and returned £335 million to its shareholders via a return of capital following completion of the acquisition.
Strategy and operational improvements achieved
At the time Euskaltel acquired Telecable, Euskaltel was a regional cable and fibre operator in Spain with a utility-like culture. Its M&A strategy did not achieve the desired integration benefits and customer numbers were declining along with revenues and profitability.
Once Zegona became Euskaltel’s largest shareholder, it implemented fundamental changes in relation to management roles, cost savings and geographical expansion, including:
Fundamental people change
- New CEO (ex Jazztel, €2.8bn value creation)
- New Chairman and strengthened Board
- New CFO and senior managers
Integration cost savings
- One operating platform for three regional brands
- Process digitalisation, on-line sales strategy
- Delivered targeted annual cost savings of €40m vs €190m OpCE
National expansion
- Increased addressable premises from 2.5m to >20m
- Partnership with Virgin brand
- Success based investment approach
Strong Delivery of Results
- Record customer net adds
- Accelerating topline growth
- €40m of savings (>20% of OpCF)
- 80% total shareholder return, 64% share price increase
The sale of our Euskaltel investment represented the successful completion of our Buy-Fix-Realise strategy in Spain. This journey included four M&A transactions and two operational turnarounds. Our involvement in Telecable and Euskaltel delivered an 88% return on shareholders’ net invested capital.
Return on Capital
The completion of MásMóvil’s acquisition of Euskaltel also provided significant value creation for Zegona shareholders.
The sale, together with the dividend, delivered proceeds of €428 million to Zegona, which were quickly and successfully passed back to shareholders by October 2021, through a £5.7 million dividend and a £329.3 million on-market share buyback by way of a tender offer launched in August 2021.
