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Orange, Masmovil in talks to create €19.6bn entity in Spain

French telecoms group Orange and Masmovil have entered into exclusive merger talks in an attempt to combine their operations in Spain.

According to both firms, the new entity would create a 50-50 joint venture that has a combined enterprise valuation of €19.6bn ($21.3 bn), with Orange Spain and Masmovil (Lorca JVCO) worth €8.1bn and €11.6bn respectively.

The agreement will see both firms benefit from equal governance rights in the combined entity. Accordingly, neither Orange nor Lorca JVCO would consolidate the combined entity in their accounts.

The deal also includes a right to trigger an IPO under certain conditions for both firms, and a path-to-control right for Orange to consolidate the combined entity.

The joint venture would also bring together the assets, capabilities and teams of the two companies in Spain, building on their highly complementary business models as well as an existing successful collaboration to serve more than 7 million fixed customers, over 20 million contract mobile customers and nearly 1.5 million TV customers.

Orange said the combined entity would have revenues of over €7.5bn ($8.2bn) and EBITDAAL of more than €2.2bn ($2.4bn). The joint venture is also expected to generate relevant synergies that could reach an annual run rate of more than €450m ($490.3m) from the third year after the closing of the operation.

The transaction is expected to be signed by the second quarter of 2022 and should close by Q2 2023, subject to approval from the relevant administrative, competition and regulatory authorities. 

“I look forward to creating this joint-venture with Masmovil and building on our existing successful collaboration to become a stronger player capable of making the investments required to develop the Spanish market,” said Stéphane Richard, chairman and CEO of Orange. “I know I can count on Jean-François Fallacher and the entire Orange Spain teams for their full mobilisation until the closing in order to make this deal a success.”

Meinrad Spenger, CEO of Masmovil, added: “To assure leading telecom infrastructure in 5G and FTTH as well as outstanding service in Spain, we need strong operators with sustainable business models. The combination of Orange and Masmovil would be beneficial for the consumers, the telecom sector and the Spanish society as a whole.”

Lazard acted as financial advisor to Orange, while Goldman Sachs Bank Europe SE acted as financial advisor to Masmovil and BNP Paribas acted as debt advisor to Masmovil.