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WOW, why it cut off the end
debt at 5% so paying off a different % of debt vs the gearing has the effect of increasing the cost of capital
" The proposed deal with Swisscom could have a much higher degree of certainty over completion, as it is expected to be reviewed only by Italian authorities, according to a person familiar with Vodafone’s thinking.
A merger with Iliad was believed to fall under the remit of Brussels’ regulator, making it potentially more challenging.
Swisscom would pay cash in a deal that would value the Italian business at €8bn on an enterprise basis.
The deal with Iliad would have provided the company with €6.6bn in cash and a shareholder loan of €2bn. It valued Vodafone Italia at €10.45bn."
https://www.ft.com/content/e49ad29e-0004-458a-9bc9-8e8b5b71e50e
Also for all of those, expecting or hoping all these sales proceeds pay of the debt, don't count on it. The cost of capital is made up of cost of equity (typically 10+%) and cost of debt (
Fair point Beo. Let's hope it creeps up for the rest of the week. God knows, Vod shareholders need a change of fortune.
Bear in mind the drag on today's SP by the broader market, the FTSE is down, on a FTSE good day then the SP would be higher, Plus the US waking up seems to bump the SP in recent days, so its hard to see the true impact on the Market of this news.
But sentiment can make a big difference to the SP Beo and it's been negative on VOD for a long time. Should the SP ever have been this low anyway based on fundamentals? I'm still not impressed with Margherita as she lacks the ability to promote the company. She's a technocrat devoid of any charisma.
Garonne, Italy is about 10% of the company, so to get a compound 3-4% increase in the SP for something that is only 10% of the company to me seems quite impactfull, theoretically if the companies were listed separately then your effectiving getting a 30% increase in the SP
The bit I'm struggling with, is we are getting 8b proceeds but the debt is our issue, whereas Illiad offer was 8.5b combined consideration but we got to keep 50/50. or am I missing something here. Don't understand how this was the better of the 2 offers.
Actually the number you quoted wasn't the liabilities. so its the net asset value + loan debt (added back as it will be in the net asset value) that we would have to write off against the 8b proceeds (but not the non current assets, it would be non current assets + current assets - working capital debt - finance lease debt, eg the net assets + loan debt i mentioned earlier)
But that debt will include working capital debt and Finance Lease debt (which are operational debt and not strictly Debt for the purposes of the acquisiton) EG IN the UK total Current & Non Current debt was £5.9b but the real non operational debt was £2.5b, Italy will be the same. There is zero chance they take on our Lease's from the P&L side and not transfer over the liability.
Lease Liabilities are accounted for in EBITDAal, so those Liabilities would just go with the business anyway as they are an operational expense rather than Financial Debt.
According to the 2023 Annual Report( p137) Italy had 10.235 billion euro in non-current assets on the books
..so does that suggest they will have to write down 2 billion euros if they sell the assets for 8 billion euros
All in all it doesn't sound like a good deal , but competition is squeezing them year on year
Looks like 70p could be our lot with this "good" news. Very disappointing and a stark reminder of the almighty hole this company has placed its shareholders in!
As they are set up as different entities in different companies, 100% there would be some debt against Italy specifically on the Statutory accounts. EG the Vodafone Limited (Vodafone UK) has £2.5b on inter company loans associated with it. Which I got from companies house, but I dont know if Italy do the same.
On a related note, not all the Liabilities in the gross debt value are Loans, some are the finance lease payable outstanding values, so some of the "debt" we have will transfer over, but any of the Loans wont.
Beo looking at the segmental results and analysis, they don't appear to allocate Debt to specific businesses within the group, at least I couldn't find any reference to it. Vodafone appear to account for their debt in the Group Cash Flow statement, so Vodafone will receive the full amount under this deal and any debt will likely be accounted for elsewhere.
Us? I dont get your point or you misunderstood mine.
we are getting $8b for a company free of debt. Meaning we have to use some of that $8b to pay down the Italy proportion of that debt. Whereas some others were suggesting we were getting $8b and the debt in Italy would move across. So all Im trying to point out is that the headline $8b isnt the accretive cash position to vodafone in this instance based on the RNS
If you don't like it don't invest. Carry on shorting it.
Its all relative though isn't it. Vodafone will still have a presence in multiple markets. if this was $60b of debt just for the UK it would be horrific but it isn't
And from a financial perspective, Italy and Spain doesn't meet its cost of debt, so if we remove those 2 (and its associated debt) then the gearing improves and our ability to makes returns over the cost of capital improves and therefor the debt becomes alot more manageable from FCF
Lol Beo, & who's books do you think the debt is ultimately on ffs !!!
So $6.5 Billion in cash, well that lowers overall debt to $62.23 Billion, the company is saved, hurrah, hurrah, hurrah .....lol
No it wont, read the RNS. The offer is 8b for a debt free Vodafone Italy. Not that they will pay 8b and take on the debt. I've been involved in a couple of acquisitions with my old company and we bought a company for £150m free of debt and cash. the company had a loan in place for £150m so essentially we bought the equity for £1. as they received £150m but then had to pay off there loan as the purchase agreement was based on it being debt free.
With the current debt levels in this beast of a company, 8bn (if all cash and it isnt) hardly dents the massive current debt pile ...
https://companiesmarketcap.com/vodafone/total-debt/#:~:text=Total%20debt%20on%20the%20balance,current%20and%20non%2Dcurrent%20debts.
Should our CEO be seen wearing orange 🍊🧡
Discuss.
" the net position 8b less any Italy debt is what should be compared to the MCAP"
good point , Beo 1...but technically it is the net debt , as any cash on the books in Italy will stay with VOD too