Vodafone Group Plc share price up, acquires Grupo Corporativo Ono SA in a 7.2-billion-euro deal

People with knowledge of the matter, who asked not to be identified because the financial details of the deal are not public yet, reported that Vodafone Group Plc has reached an agreement to acquire Grupo Corporativo Ono SA, which is a Spanish cable operator. The deal is said to be estimated to 7.2 billion euros (10 billion dollars) including debt. This price amounts to 10.5 times the earnings of Ono before interest, taxes, depreciation and amortization.

One of the people familiar with the matter explained that the contract has already been signed, but is expected to be officially announced today. They also reported that Vodafone is to assume a 3.34-billion-euro debt of Ono and will pay the rest of the deals price in cash to the shareholders of the company. The agreement of the acquisition will also require a regulatory approval, which will be received before the summer of 2014, according to another person with knowledge of the process.

The deal is the final stage of weeks-long negotiations and is considered as a part of the strategy of Vodafone Group Plc for consolidation of the fragmented telecom operators situated in Europe. Through the purchase of Ono, Vodafone keeps following its policy from 2013, when it acquired the cable-network operator Kabel Deutschland in a deal that amounted to 10 billion euros including debt. In addition, it will take over in the place of a planned initial public offering of Grupo Corporativo Ono SAs stock.

Vittorio Colao, who is the Chief Executive Officer of Vodafone Group Plc said in an interview in Barselona in February, which was cited by Bloomberg: “We are clearly interested in broadband in Spain; we are clearly interested in offering our own solutions.” Mr. Colao has been trying to turn the company into a content centre that customers can access across landline and wireless technologies.

Vodafone Group Plc refused to make any comments on the rumours. The shareholders of Ono – Providence Equity Partners, Thomas H Lee Partners, CCMP Capital Advisors and Quadrangle Capita, which are private equity groups, also declined to comment.

Vodafone Group Plc rose by 0.52% in London by 8:03 GMT to trade at 223.30 pence per share, marking a one-year change of -33.52%. The company is valued at 58.73 billion pounds. According to the Financial Times, the 15 analysts offering 12 month price targets for Vodafone Group Plc have a median target of GBX 251.10, with a high estimate of GBX 290.00 and a low estimate of GBX 215.00. The median estimate represents a 13.03% increase from the previous close of 222.15 pence.