Sky and Vodafone NZ have agreed to merge their operations in New Zealand. Under the terms of the deal, Sky will acquire all of the shares in Vodafone NZ for NZD 3.437 million in cash and shares. The cash consideration for Vodafone will amount to NZD 1.25 billion, to be funded through new debt. Sky will also issue new shares, giving Vodafone a 51 percent interest in the combined group. The new Sky shares will be issued at NZD 5.40 per share.
The new company will be led by Russell Stanners, currently CEO of Vodafone NZ. Sky chairman Peter Macourt will become chairman of the board. The board of Sky fully supports the proposed transaction and unanimously recommends shareholders to vote in favour.
Vodafone NZ is New Zealand's leading mobile and number two broadband provider, with over 2.35 million mobile connections and over 500,000 fixed-line connections. Sky is New Zealand's leading pay TV provider with over 830,000 subscribers. The combined group will soon be able to soon set up entertainment content across all platforms and for all devices, give a greater choice of products in general for packaged services, and up customer service. The group will be one of the largest listed on the NZX Main Board (NZX).
For the year to end June 2017, pro-forma revenue is seen at NZD 2.914 million, underlying EBITDA at NZD 786 million, underlying operating free cash flow at USD 467 million and underlying free cash flow at NZD 298 million, before synergies and integration costs.
Cost and capex synergies will be released from the rationalisation of overlapping functions, use of Vodafone NZ's technical and network capabilities and improvement in the efficiency of sales and marketing. The combined group will also have access to a lower cost set top box through Vodafone and the potential to reduce the amount of satellite transponder capacity required through the use of internet-based delivery over the medium term. The monetisation of entertainment content on mobile devices could further boost synergies.
Sky has entered into a facility agreement with Vodafone for up to NZD 1.8 billion to fund the cash part of the deal and other incidentals.
Following completion, the initial board of the combined group will be made up of nine directors, consisting of five directors from the existing Sky board (4 independent directors and John Fellet as an executive director) and four directors appointed by Vodafone (3 directors appointed to represent Vodafone and Russell Stanners as an executive director). John Fellet will be appointed CEO of Media and Content, reporting to Stanners. The rest of the management team will be drawn from both companies.
The directors appointed by Vodafone will be: Serpil Timuray, Regional CEO Africa, Middle East and Asia-Pacific; John Otty, Regional CFO Africa, Middle East and Asia-Pacific; and Phil Patel, Regional Commercial Director, Africa, Middle East and Asia-Pacific.
