LONDON: Shares in Vodafone, the world's largest mobile operator by revenue, fell almost 2 percent on Monday on a report that its French joint venture partner plans to pay less than some expected to buy it out.
Vodafone is holding talks with Vivendi over the sale of its 44 percent stake in SFR, their French mobile joint venture, and a report in the Financial Times said Vivendi was unwilling to pay much more than 6 billion pounds ($9.64 billion) for the minority stake.
Analysts covering Vodafone believe some in the market had expected the British firm to receive nearer to 7 billion pounds for the asset, which has been singled out for sale as part of Vodafone's strategy to sell off units it does not fully control.
Vodafone declined to comment on the report, and a source familiar with the situation said simply that talks were ongoing. The source added that a deadline for a deal had not been set however, as some other media reports have suggested.
Vodafone Chief Executive Vittorio Colao has said he is not a forced seller and several analysts said although they did not think that 6 billon pounds was a terrible price, they thought that Vodafone could wait to see if the price improves.
For its part, Vivendi has said that taking full ownership of SFR is its top M&A priority since the deal would markedly improve its profits and cash flow.
But Vivendi CEO Jean-Bernard Levy has also signalled that he is not a buyer at any price and pledged not to overpay.
The FT report said a 6 billion pound price would imply an enterprise value of 20.9 billion euros for SFR, or 5.5 times the French mobile operator's 2011 core earnings.
"I would say that 5.5 times as a multiple is OK," Execution Noble analyst Will Draper told Reuters.
"It is more or less where the sector is trading. SFR is worth more than the sector average because it's a good quality business, however it's a minority stake and Vivendi would want that at a discount."
Vivendi's top range on the price cited by the Financial Times on Monday is in line with what sources have told Reuters in the past about the negotiating positions of the two sides.
Last summer, sources told Reuters that Vivendi was telling investors in road shows that it would seek to pay 5 to 6 times EV/EBITDA, which is roughly 6.1 billion to 7.8 billion euros for Vodafone's SFR stake.
At the same time the sources told Reuters that Vodafone was signaling in its road shows that it wanted a multiple of at least 6 times EV/EBITDA. A figure of 7 billion euros, in the middle of the Vivendi range, equates to just over 6 billion pounds.
Bernstein analyst Robin Bienenstock agreed that the unit would likely be sold at a market multiple because Vodafone would struggle to extract much of a premium for an asset that has a willing seller and a willing buyer.
She said she was neither thrilled nor horrified by the talk of 6 billion pounds and said the more important point would be whether Vodafone and Vivendi could agree a long-term roaming deal which would allow Vodafone customers to access the SFR network in the future.
"I cannot see how it can go for anything other than a market multiple," she said. "I don't see how they could get anything extra seeing that both sides want a deal and neither can afford to lose face."
Other analysts however cautioned that any significant disagreement over price could result in the deal being delayed.
"They appear to want 6 and Vodafone wants 7, according to what I'm reading in the papers and that's quite a big gap," ING analyst John Davies told Reuters. "It's not as if either of them need to do a deal, so I'm not convinced that anything will happen terribly rapidly."
Shares in Vodafone were down 1.65 percent at 1242 GMT to 176.94 pence after it fell to 175.75 in earlier trading. Vivendi, which declined to comment on the report, was down 0.18 percent.
Comments
Comments are closed.