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This document is an advertisement and does not constitute a prospectus in connection with an offering of securities of the Company. Investors must neither accept any offer for, nor acquire, any securities to which this document refers, unless they do so on the basis of the information contained in the applicable prospectus to be published by the Company. The subscription or purchase of ordinary shares of the Company is subject to specific legal or regulatory restrictions in certain jurisdictions. Persons distributing this communication must satisfy themselves that it is lawful to do so. The Company assumes no responsibility in the event there is a violation by any person of such restrictions.
ZEGONA COMMUNICATIONS PLC
ZEGONA TO INCREASE INVEStment IN EUSKALTEL
London, England, 19 October 2018 - Zegona Communications PLC ("Zegona" or the "Company") announces a proposed partial tender offer for up to 14.9% of Euskaltel, S.A. ("Euskaltel") at a price of €7.75 per share
Zegona today announces that it intends to make a partial tender offer in cash to acquire up to 14.9% of the outstanding shares of Euskaltel at a price of €7.75 per share (the "Tender Offer"). The offer price represents a premium of 18% over the closing price on 18 October 2018. Zegona currently owns 15.0% of Euskaltel and would increase its ownership to 29.9% if the Tender Offer were accepted in full.
The Tender Offer will be funded through a non pre-emptive institutional placing, which has been fully underwritten by Barclays Bank PLC ("Barclays"), of ordinary shares in the capital of Zegona (the "New Zegona Shares") to raise up to £225 million (the "Placing").
As Zegona has previously stated, Euskaltel is a strategically attractive business with a strong competitive position in its home markets and a range of opportunities to deliver profitable growth. Zegona believes there is potential to create significant additional value by driving efficiency improvements, increasing revenue growth in existing regions and accelerating expansion outside the current footprint.
With increased ownership, Zegona anticipates greater participation on the board of directors of Euskaltel. This creates the opportunity for Zegona's senior management to apply its extensive sector knowledge and experience to contribute additional value to the business and help realise its full potential.
Eamonn O'Hare, Zegona's Chairman and CEO, commented:
"We are delighted today to announce our intention to make an offer to acquire up to 14.9% of Euskaltel at a price of €7.75 per share. If this offer were accepted in full, Zegona would almost double its ownership in the business to 29.9%. This significant incremental investment not only provides Euskaltel shareholders with a very attractive 18% premium but also reinforces Zegona's commitment and underlines our belief in the future potential of the Euskaltel business. In addition, we see opportunities where our industry knowledge and experience can be valuable to Euskaltel, and we look forward to continuing our constructive relationship with the leadership team to help return the business to growth."
Tavistock (Public Relations adviser - UK)
Tel: +44 (0)20 7920 3150
Jos Simson - firstname.lastname@example.org
Llorente y Cuenca (Public Relations adviser - Spain)
Tel: +34 (0) 91 563 7722
Jorge López-Zafra - email@example.com
Further Details on the Proposed Transaction
Zegona today announces that its board has resolved to increase its investment in Euskaltel and that it intends to make a partial tender offer in cash to acquire up to 26,620,000 of the outstanding shares of Euskaltel (the "Euskaltel Shares"), representing approximately 14.9% of the outstanding shares, at a price of €7.75 per share. The offer price represents a premium of 18% over the closing price on 18 October 2018, the last trading day before this announcement. Zegona currently owns 15.0% of the outstanding Euskaltel Shares and would reach a stake of 29.9% if the Tender Offer were accepted in full.
Eligible Euskaltel shareholders may tender up to their entire holding, but in the event that more than 26,620,000 Euskaltel Shares are tendered in aggregate, then the amount of Euskaltel Shares purchased from each eligible Euskaltel shareholder will be reduced according to Spanish legislation as will be set out in the prospectus relating to the Tender Offer.
The Tender Offer will be funded through a non pre-emptive placing to institutional investors of New Zegona Shares to raise up to £225 million. The proceeds of the Placing will also be used for transaction expenses and to provide funds for general corporate purposes. The Placing has been fully underwritten by Barclays. Zegona targets to issue New Zegona Shares within a price range based on the look-through value of Zegona's 15.0% shareholding in Euskaltel. Currently the target price range is £1.23 to £1.44 per New Zegona Share based on the closing price of Euskaltel Shares of €6.58 on 18 October 2018 and the tender offer price of €7.75.
The New Zegona Shares will, when issued and fully paid, rank pari passu in all respects with each existing ordinary share of £0.01 each in Zegona, including the right to receive all dividends or other distributions. Applications will be made to the UKLA and to the London Stock Exchange for the New Zegona Shares to be admitted to the Official List with a standard listing and to trading on the London Stock Exchange's Main Market for listed securities, respectively. For the foreseeable future, Zegona intends to pass through the Euskaltel dividends it receives to its shareholders in full.
The offer of New Zegona Shares to persons resident in, or who are citizens of, or who have a registered address in countries other than, the United Kingdom may be affected by the laws of the relevant jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to subscribe for New Zegona Shares pursuant to the Placing.
The Tender Offer and the Placing will be conditional on receipt of regulatory approvals and the Placing will require approval by Zegona shareholders. Zegona expects to launch the Placing and publish a circular, including the notice of a general meeting, during the fourth quarter of 2018.
Barclays is acting as global co-ordinator and underwriter in connection with the Placing; Oakley Advisory Limited is advising Zegona and is acting as co-bookrunner for the equity placing.
Euskaltel: Euskaltel is the leading quadplay provider of telecommunications in Northern Spain with 2.2 million homes passed and approximately 663 thousand residential customers in the Basque Country, Galicia and Asturias under the Euskaltel, R Cable and Telecable brands. Euskaltel was created by the Basque Government and three savings banks in 1995 to be the Basque Country's alternative telecommunications operator and acquired R Cable in November 2015 and Telecable from Zegona in July 2017.
Total revenue for the six months ended 30 June 2018 as reported by Euskaltel was €349.3m and declined on a proforma basis by 0.8% compared to the six months ended 30 June 2017. Adjusted EBITDA for the six months ended 30 June 2018 as reported by Euskaltel was €168.8m and declined on a proforma basis by 0.2% compared to the six months ended 30 June 2017.
Zegona: Zegona was established in 2015 with the objective of investing in businesses in the European Telecommunications, Media and Technology ("TMT") sector and improving their performance to deliver attractive shareholder returns. Zegona is listed on the standard listing segment of the Official List of the Financial Conduct Authority and the Main Market for listed securities of the London Stock Exchange, and is led by former Virgin Media executives Eamonn O'Hare and Robert Samuelson.
Zegona acquired Telecable, the leading quadplay cable telecommunications operator in the Asturias region of Spain in August 2015. Zegona sold Telecable to Euskaltel in July 2017 and since that time has owned 15.0% of Euskaltel. As part of that transaction, Robert Samuelson was appointed to Euskaltel's board of directors and its committees. Zegona also entered into a standstill agreement with Euskaltel that limited it to acquiring no more than 1.5% of Euskaltel for one year post the closing of the sale of Telecable. This standstill arrangement has now come to an end.
Zegona's senior management has a wide-ranging network of contacts across the international telecommunications sector, giving it access to capabilities that can benefit Euskaltel and ensure it remains a leading Basque business. This network enabled Zegona to propose Jon James, previously COO of ComHem and currently CEO of Tele2 Netherlands, as a new independent board member of Euskaltel. Jon was appointed a director of Euskaltel in June 2017. Over recent months, Zegona has discussed Euskaltel with the ex-Jazztel CEO, José Miguel García, and believes his skills and experience could also be a valuable addition to the Euskaltel leadership. Similarly, Zegona's senior management has a long-standing relationship with the Virgin Group and Zegona believes there is the opportunity for Euskaltel to use the well-known Virgin brand on attractive terms for its expansion into new regions.
This announcement contains inside information. It has been issued by, and is the sole responsibility of, the Company.
This announcement has been prepared in accordance with English law, the Listing Rules and the Disclosure Guidance and Transparency Rules and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.
The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.
Certain information in this announcement is based on management estimates. By their nature, estimates may not be correct or complete. Accordingly, no representation or warranty (express or implied) is given that such estimates are correct or complete or founded on reasonable grounds. No representation or warranty (express or implied) is given that such estimates are founded on reasonable grounds. Zegona does not undertake any obligation to correct or complete any estimate whether as a result of being aware of information (new or otherwise), future events or otherwise.
The information contained in this document is for background purposes only and does not purport to be full or complete. No reliance may be placed by any person for any purpose on the information contained in this document or its accuracy, fairness or completeness. All information in this announcement in respect of Euskaltel and its group has been obtained from publicly available information and has not been verified.
This document may not be published, distributed or transmitted by any means or media, directly or indirectly, in whole or in part, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia) or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. This document does not constitute or form a part of any offer to sell, or a solicitation of an offer to buy or subscribe for, securities in the United States. The securities in this document have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"). Securities may not be offered or sold within the United States absent (i) registration under the Securities Act or (ii) an available exemption from registration under the Securities Act. All offers and sales of securities outside of the United Sates will be made in reliance on, and in compliance with, Regulation S under the Securities Act. There is no intention to register the securities mentioned herein in the United States or to make a public offering of such securities in the United States.
This document is only addressed to and is only directed at persons in member states of the European Economic Area (the "EEA") who are "qualified investors" within the meaning of Article 2.1 of the Prospectus Directive as amended and to the extent implemented in the relevant member state (Directive 2003/71/EC) ("Qualified Persons"). In addition, in the United Kingdom, these materials are directed solely at Qualified Persons: (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); (ii) who are persons falling within Article 49(2)(a) to (d) of the Order; or (iii) to whom it may lawfully be communicated without any further action by the Company (all such persons in (i) to (iii) together being referred to as "relevant persons"). Any investment or investment activity to which these materials relate is available only to, and will be engaged in only with, Qualified Investors in member states of the EEA and, in the United Kingdom, to Qualified Investors who are also relevant persons.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "envisages", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not facts. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: Euskaltel's failure to adopt Zegona's plan, a condition to the Placing or Tender Offer not being satisfied, expected synergy savings not being realised, changing demands of consumers of telecommunications services, the increasing adoption of free-to-home and direct-to-home television services, changing business or other telecommunications market conditions, and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement. Forward-looking statements contained in this announcement based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Subject to any requirement under the Listing Rules, the Prospectus Rules, the Disclosure Guidance and Transparency Rules or other applicable legislation or regulation, Zegona does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.
Barclays Bank PLC and Oakley Advisory Limited
Barclays Bank PLC which conducts its UK investment banking activities through its Investment Bank and which is authorised in the United Kingdom by the Prudential Regulation Authority and regulated by the Financial Conduct Authority ("FCA") and the Prudential Regulation Authority, is appointed as the Company's global co-ordinator and underwriter only and is therefore acting only for the Company in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible for providing the regulatory protection afforded to clients of Barclays or advice to any other person in relation to the matters contained herein. Neither Barclays nor any of its directors, officers, employees, advisers or agents accepts any responsibility or liability whatsoever for this announcement, its contents or otherwise in connection with it or any other information relating to the Company, whether written, oral or in a visual or electronic format.
Oakley Advisory Limited, which is authorised and regulated in the United Kingdom by the FCA, is appointed as the Company's financial advisor and co-bookrunner only and is therefore acting only for the Company in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible for providing the regulatory protection afforded to clients of Oakley Advisory Limited or advice to any other person in relation to the matters contained herein. Neither Oakley Advisory Limited nor any of its directors, officers, employees, advisers or agents accepts any responsibility or liability whatsoever for this announcement, its contents or otherwise in connection with it or any other information relating to the Company, whether written, oral or in a visual or electronic format.
Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website for any other website, is incorporated into, or forms part of, this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.
The person responsible for arranging for the release of this announcement on behalf of Zegona is Dean Checkley, whose business address is 20 Buckingham Street, London, WC2N 6EF.
 Zegona estimates cost savings of circa €40 million per annum are achievable from a range of operating and mobile access integration measures
 Including expanding the network to up to 200,000 new homes in existing Euskaltel regions, which Zegona believes can deliver a 3 year payback (based on market information), and investing in customer-focused service upgrades, such as gigabit broadband access
 The standby underwriting agreement contains customary representations and warranties as well as other conditions. The parties will enter into a Placing Agreement in advance of the publication by Zegona of the prospectus in connection with the Placing.
 Look-through value per Zegona share calculated based on 26.8 million Euskaltel shares currently held by Zegona, total existing Zegona shares outstanding of 126.2 million and a EUR/GBP exchange rate of 1.14
 Adjusted EBITDA is as defined by Euskaltel in its 2017 Annual Report. Proforma numbers are as reported by Euskaltel and have been adjusted to include Telecable's full year performance in 2017
 Zegona considers a brand license fee at a rate of 2% or less of branded revenues to be attractive