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Vodafone Italy considers proposed merger with Iliad

Vodafone Italy considers proposed merger with Iliad Photo: Vodafone Italy considers proposed merger with Iliad (GettyImages)

Billionaire Xavier Niel's Iliad has proposed a merger with Vodafone Group Plc's Italian operations, valuing Vodafone Italia at €10.45 billion, including debt. The deal would create a new entity, initially giving Vodafone 50% of the share capital, a cash payment, and a shareholder loan while allowing Iliad an option for gradual full control, according to Financial Times.

Under the proposal, Vodafone would receive a 50% stake in the merged company, €6.5 billion in cash, and a €2 billion shareholder loan. Iliad Italia would be valued at €4.45 billion, and Iliad would gain a 50% stake, a €500 million cash payment, and a similar shareholder loan.

The deal includes options for the Iliad to incrementally acquire more shares, with control over CEO and CFO appointments.

Last year, Vodafone declined an €11.25 billion offer from an Iliad-backed consortium for its Italian unit. The new proposal comes amid Vodafone's struggles with falling share prices and pressure to sell or merge its national units.

Vodafone shares saw a significant rise following this announcement.

French entrepreneur

Xavier Niel is a prominent French businessman known for his significant involvement in the telecommunications and technology industry. He is the founder and majority shareholder of Iliad, a major French Internet service provider and mobile operator trading under the Free brand, France's second-largest ISP and third mobile operator.

Vodafone Italy considers proposed merger with Iliad

Xavier Niel (Photo: BNN Bloomberg)

Niel is also a co-owner of the newspaper Le Monde and has various other investments, including Monaco Telecom, Salt Mobile SA, and Eir ownership. As of August 2021, his net worth was estimated at US$10.5 billion.

Strategic merger

The merger proposal arises from Italy's competitive telecommunications market and Vodafone's strategic hurdles. Italy's telecom sector is known for low-priced services, partly due to Iliad's entry into the market in 2018, which intensified competition.

Xavier Niel's previous investments in Vodafone, support for mergers in various markets, and Vodafone's recent agreement to sell its Spanish business set the stage for this significant proposed merger in the Italian telecom sector.

This move reflects the European telecommunications industry's ongoing consolidation and strategic repositioning.