Vodafone plans €3 billion mandatory convertibles for cable purchase

New York, May 9 – Vodafone Group plc plans to use €3 billion of mandatory convertible bonds as part of the financing for its acquisition of European cable networks from Liberty Global plc, according to a news release.

Vodafone announced on Wednesday that it will acquire Unitymedia GmbH in Germany and Liberty Global’s operations, excluding its direct home business, in the Czech Republic, Hungary and Romania.

The total enterprise value of the transaction is €18.4 billion, made up of €10.8 billion in cash and €7.6 billion of existing Liberty debt.

Other financing for the cash element will be made up of €10 billion of new debt facilities, including hybrid debt securities, and existing cash.

Vodafone said that the acquisition will make it the leading “next generation network” owner in Europe, with 54 million homes connected through cable or fiber and a reach of 110 million homes and businesses.

“We are committed to accelerating and deepening investment in next generation mobile and fixed networks, building on Vodafone’s track record of ensuring that customers benefit from the choice of a strong and sustainable challenger to dominant incumbent operators,” said Vodafone chief executive Vittorio Colao in the news release. “Vodafone will become Europe’s leading next generation network owner, serving the largest number of mobile customers and households across the E.U.”

The mandatory convertibles are expected to have a three-year maturity.

Vodafone said that if it is within its targeted leverage range of 2.5 times to 3.0 times then it may choose to purchase the shares issued under the terms of the convertibles, avoiding equity dilution.

The company will hedge its exposure to share price movements via an options strategy, meaning that the economic cost to repurchase the convertibles at maturity will be similar to the face value of the bonds at issuance.

Vodafone is a London-based telecommunications company.

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