By Marcus Leach
Vodafone have announced an agreement to sell its entire 44% shareholding in SFR to Vivendi for a cash consideration of €7.75 billion (£6.8 billion).
Vodafone will also receive a final dividend from SFR of €200 million (£176 million) on completion of the transaction. In addition, Vodafone and SFR will enter into a Partner Market agreement which will maintain their commercial co-operation.
Vodafone's shareholding in SFR contributed £573 million to Vodafone's adjusted operating profit in the financial year to 31 March 2010, and £284 million in the six months to 30 September 2010.
£4 billion (€4.5 billion) of the net proceeds will be returned to shareholders by way of a share buy-back with the remainder of the proceeds used to reduce the Group’s net debt. The share buy-back will be carried out after the completion of the existing programme which is expected to be completed in June 2011.
Subject to customary competition authority and regulatory approvals, the transaction is expected to complete during the second calendar quarter of 2011. At 30 September 2010 the SFR investment had a carrying value of €4.9 billion (£4.3 billion) in Vodafone’s accounts. The transaction consideration represents an EV/EBITDA multiple of 6.7x CY10 EV/EBITDA3 and is expected to be neutral to free cash flow per share following completion of the share buy-back.
Commenting on the transaction, Vittorio Colao, Chief Executive of Vodafone said:
“Our Board remains committed to realising maximum value from our non-controlled assets. The sale of our stake in SFR, at an attractive multiple, represents a significant further step in the execution of this strategy. In addition, we have secured a valuable partnership agreement in France which will allow us to continue to deliver compelling cross-border services to both consumer and enterprise customers across the major markets of western Europe.
“By returning £4bn to our shareholders, we are increasing our current buy-back programme to £6.8bn in total, equivalent to over 7% of Vodafone's current market capitalisation.”