Vodafone has agreed to sell Vodafone Spain to Zegona Communications for a consideration of €5bn (£4.37bn).

Upon completion, Vodafone’s consideration will comprise at least €4.1bn (£3.6bn) in cash and up to €900m (£790m) in the form of redeemable preference shares.

Zegona, which is headquarted in the UK, has stated that it is fully committed to the deal, providing debt facilities which total up to €4.2bn (£3.67bn) to “satisfy the cash considerations”. The firm also intends to raise equity via an institutional placing of new Zegona shares to investors prior to completion of the transaction, which is expected to total between €300m-600m (£262m-525m).

News of the deal was initially reported by Spanish newspaper, Expansion, last month, stating that Zegona was interested in purchasing Vodafone Spain, the third largest telecom operator in the country, alongside Telefonica and Orange.

As part of the deal, Vodafone and Zegona will enter into a brand license agreement, which permits the use of the Vodafone brand in Spain for up to 10 years, following the completion of the deal.

However, the deal will constitute a reverse takeover, meaning that Zegona will need to apply for the readmission of its shares to the standard listing segment of the official list and the main market of the London Stock Exchange, following approval by the Financial Conduct Authority.

Vodafone CEO, Margherita Della Valle, said: “The sale of Vodafone Spain is a key step in right-sizing our portfolio for growth and will enable us to focus our resources in markets with sustainable structures and sufficient local scale. I would like to thank our entire team in Spain for their dedication to our customers and relentless determination to improve our organic performance. However, the market has been challenging with structurally low returns.

“My priority is to create value through growth and improved returns. Following the recently announced transaction in the UK, Spain is the second of our larger markets in Europe where we are taking action to improve the group's competitiveness and growth prospects.”

Chairman and CEO at Zegona, Eamonn O’Hare, added: “We are very excited about the opportunity to return to the Spanish telecoms market. This financially attractive acquisition marks our third deal in Spain after successful turnarounds at Telecable and Euskaltel. With our clearly defined strategy and proven track record, we are confident that we can create significant value for shareholders.”

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