Enel has agreed to pay Vodafone E7.25 billion for Infostrada.
Italian utility Enel expects to complete the deal to acquire telco Infostrada from Vodafone by the end of March, thereby allowing it to merge it with its existing Wind telecoms operation to create ‘New Wind’ by 1 July 2001, and legally complete the merger by the end of the year.
The ruling by Italy’s competition authority that stated that Enel could only acquire Infostrada if it sold off some generation capacity has been rather a blessing for the generator. The delay allowed the company to negotiate a price reduction with Vodafone, reflecting both the regulatory complications and the fall in the value of telecoms stocks. The price paid will be 34% lower than the original price offered in October 2000.
However, Enel will pay for Infostrada in cash, rather than jointly cash and bonds as originally proposed in the initial offer. It will also take on E1.3 billion of debt from Infostrada. So, while the deal does not provide Vodafone with anything like the sum it was originally looking for, the cash does significantly reduce its debt. This puts the world’s largest mobile operator in an even stronger position to make global acquisitions than it was before.
Infostrada will be merged with Wind to become New Wind, which will have the largest number of registered Internet users in Italy, as well as the country’s second largest fixed-line telecoms company in terms of subscribers after Telecom Italia. New Wind is expected to float approximately 25% of its shares in an IPO by the end of the year.
In return for this, Enel is expected to have to dispose of 5,500MW of generation capacity. An offering of electricity plus telecoms would make Enel a dominant force in the market, so the regulator has decided its market position in electricity has to be reduced. While Enel is expected to contest this, it is a small price to pay for such a strong position in the telecoms market.