Zegona Communications has announced the proposed allocation of the €1.8 billion proceeds from two recent FibreCo transactions. The proposal is to return €1.6 billion to shareholders and use the remaining €200 million for debt reduction.

The €1.6 billion shareholder return includes a €1.4 billion special dividend (£1.62 per Zegona ordinary share) and a €200 million share buyback programme. The special dividend will provide EJLSHM Funding Limited with €975 million to settle the Vodafone financing in full and a €440 million pro rata payment for remaining ordinary shareholders. Settling the Vodafone financing will enable a 69 per cent reduction in Zegona ordinary shares.

€1.4bn Special Dividend

• The special dividend will provide EJLSHM with €975 million to settle the Vodafone financing in full.
• The €975m includes a principal sum of €900 million and €75 million of accrued return. 
• Settling the Vodafone financing in full will enable the cancellation of the 523 million Zegona ordinary shares held by EJLSHM. This will reduce Zegona’s ordinary shares in issue by 69 per cent from 759 million to 236 million.
• The special dividend will provide a €440 million pro rata payment to remaining ordinary shareholders. €440 million is equivalent to £1.62 per Zegona ordinary share excluding those held by EJLSHM.
• The special dividend repays the original equity capital raised for the Vodafone Spain acquisition plus an additional return of 12p.

€200m Share Buyback Programme

• Zegona will initiate the €200 million share buyback programme following the cancellation of the 523 million EJLSHM Zegona ordinary shares.
• Zegona believes a share buyback programme will drive very attractive returns to shareholders post the 69 per cent share count reduction.

€200m Debt Reduction

• €200m of the proceeds will be used to reduce Net Debt to €3.4 billion and reduce leverage to 2.58x.
• This reduction in debt reinforces Zegona’s commitment to its leverage target of 1.5x-2x.
• The €200 million debt reduction further accelerates progress in reducing total annual interest costs. Annual interest costs have reduced from €294 million at the time of the Vodafone acquisition to €235 million post recent refinancings. Applying current market debt yields to the reduced net debt balance demonstrates the potential to drive annual interest costs well below €200 million.

The full execution of this capital allocation proposal is dependent on the completion of the FibreCo transactions and shareholder approval at a general meeting to be convened shortly. A key part of the resolution at the general meeting will be the removal of the requirement for six-months’ notice for the settlement of the Vodafone financing. Full details will be included in a shareholder circular to be published soon.

Zegona expects the GIC investment in PremiumFiber (MasOrange FiberCo) to be completed by the end of this calendar year and the AXA investment in FiberPass (Telefonica FiberCo) to be completed by the end of the first quarter of the 2026 calendar year. The objective is to settle the Vodafone financing as quickly as possible. Therefore, Zegona intends to execute the special dividend once the proceeds from the PremiumFiber transaction have been received. Zegona also intends to initiate the €200 million share buyback programme following the cancellation of the 523 million EJLSHM shares. If the cancellation of the EJLSHM shares occurs before the completion of the FiberPass transaction Zegona plans to fund the early stages of the buyback programme with current balance sheet resources.

Eamonn O’Hare, Chairman and CEO of Zegona, commented, “Today’s announcement marks another major milestone in the transformation of Vodafone Spain and Zegona Communications plc. In just 18 months since the Vodafone acquisition, we have delivered on every major element of our strategy, driving operational progress, executing two landmark FibreCos, completing the transition to a 100 per cent FTTH network, and unlocking €1.8 billion of proceeds. The capital allocation proposal we have announced today is designed to be shareholder friendly, whilst simplifying our capital structure, satisfying the needs of the business and delivering a fit for purpose balance sheet. I am particularly pleased that the special dividend allows us to reward our shareholders by returning their original equity investment plus a little extra interest.”

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Tags: FibreCo, Vodafone, zegona