Last week it was confirmed that Infratil Ltd (ASX: IFT) was in takeover discussions with Vodafone Group Plc with respect to Vodafone NZ. Today, Infratil announced an NZ$3.4 billion acquisition.
About Infratil
Infratil is a New Zealand-based infrastructure investment company. It owns a range of diversified assets including airports, electricity generators, retailers, and a public transport business. Its operations cover New Zealand, Australia and the US. Infratil currently has a market capitalisation of $2.43 billion.
What’s The Big Deal?
Infratil announced last week that it and another party were in discussions with Vodafone Group Plc to acquire Vodafone New Zealand.
The discussions at that stage were said to be “ongoing and incomplete”.
Today, Infratil announced it will acquire Vodafone New Zealand for $3.4 billion and the other party to the transaction was revealed to be Brookfield Asset Management Inc.
Vodafone NZ has welcomed the transaction with CEO Jason Paris paying respect to Infratil CEO Marko Bogoievski.
“We have a lot of respect for both Infratil and Brookfield and we are very pleased to have these two experienced global infrastructure investment partners on board”, he said.
“I believe Marko Bogoievski’s professional background in the sector will be valuable and I look forward to working closely with him and the Infratil team moving forward.”
Vodafone NZ generated revenue of NZ$2 billion and underlying EBITDA of $463 million for the 12 months ended 31st March 2019.
The acquisition value implies an underlying EBITDA multiple of 6.9x-7.4x based on FY2020 forecast underlying EBITDA.
Is It A Done Deal?
Completion of the acquisition is conditional on Overseas Investment Office approval and Commerce Commission approval, which Infratil expects will be granted by August 2019.
Infratil Chairman Mark Tume highlighted the importance of enhancing telecommunications networks in New Zealand.
“Telecommunications is critical infrastructure for New Zealand and Vodafone NZ is an integral part of everyday Kiwi life”, he said.
“The quality and availability of its networks have a direct bearing on New Zealand’s competitiveness and future growth prospects.”
The acquisition is set to be funded by a $1,029 million equity contribution from both Infratil and Brookfield, with the balance coming from Vodafone NZ level debt and a portion of equity reserved for the Vodafone NZ executive team.
Infratil’s equity contribution will be funded by a fully underwritten equity raising of up to $400 million, while the balance will be funded through debt facilities.
The timing and structure of the equity raising is yet to be announced and will be subject to market conditions.
Is Infratil A Buy?
This is certainly a big move for Infratil and should trigger some significant movements in the share price when shares come out of their ASX trading halt this morning.
While it seems likely Infratil will receive approval for the transaction, the ACCC’s recent decision on TPG Telecom Ltd’s (ASX: TPM) takeover of Vodafone Australia might make some investors hesitant to commit too much money before approval is granted.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.