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24 May 2017 · 3 min read

Altamir – Merger of top 10 portfolio holding Melita and Vodafone Malta

Combination will create a new fully integrated provider of mobile, fixed line, broadband and TV services

Altamir (LTA) has announced the merger of Maltese telecoms operator Melita, in which it holds a 28.9% stake through the Apax France VIII fund, with Vodafone Malta to create a fully integrated communications company, which will operate under the Vodafone brand, distributing a wide range of services including Vodafone’s global portfolio of products. Announced in December 2015, the acquisition of Melita by Apax France VIII fund and Fortino Capital was completed in early 2016. At end-2016, Melita had been held in Altamir’s portfolio for less than one year and so was valued at its residual investment cost of €33.9m, representing 3.9% of portfolio fair value. At completion, Apax France VIII fund and Fortino Capital will own 51% of the combined company and Vodafone will own the remaining 49%.

The transaction values Vodafone Malta at an enterprise value of €208m, equating to 6.8x 2016 EV/EBITDA and 15.1x 2016 EV/OpFCF* , and values Melita at an enterprise value of €298m, equating to 8.9x 2016 EV/EBITDA and 15.3x 2016 EV/OpFCF*. At completion, the combined company’s net debt is expected to be c €345m, with Vodafone receiving an estimated cash payment of €120m and Melita’s shareholders receiving an estimated cash payment of €33m.

The rationale for the transaction is that the combined company will be in a stronger position to compete with the fully integrated incumbent GO, and is expected to generate cost synergies through the rationalisation of activities and greater network investment efficiency. Apax Partners MidMarket and Fortino Capital intend to appoint the current CEO of Melita, Harald Rösch, as CEO of the combined company and Vodafone intends to appoint the current CFO of Vodafone Malta, Caroline Farrugia, as CFO of the combined company.

In 2016, Melita outperformed its budget slightly, delivering 8% EBITDA growth with revenues rising by 5% to €64.8m, while the company focused on deploying new modems and decoders, and modernising its mobile (3G to 4G) and fixed-line networks. Harald Rösch, who has extensive experience in the telecommunications industry, was appointed as chairman & CEO of Melita in April 2016 and implemented several new measures, in particular to improve customer care.

Read Edison’s most recent research report on Altamir here.

Note: *OpFCF = Operating free cash flow

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