The board of Spain's biggest cable operator Ono will meet today to decide if it should accept a £6bn (€7bn) bid from Vodafone or push ahead with its plans for an IPO.
The sale would see a reasonable return on investment for the four venture funds Anglo-CCMP, Providence, Thomas H Lee and Quadrangle, which invested in 2005.
Selling at €7bn would clear Ono's debt of €3.42bn and give the investors a return of €3.58bn. The four investors put in €1bn for a 54 per cent stake and would see a return of €1.8bn. This is a moderate rate of return in the VC business.
Some experts argue that this is too low a figure, as it would place the offer at 9.5 times EBITDA (earnings before interest, taxes, depreciation and amortization) and that the business environment generally dictates an offer of between 10 and 12 times EBITDA.
The bid is believed to have been trigged by Vodafone becoming cash-rich following the sale of its stake in Verizon Wireless, and the combined strength of a mobile and broadband offering to take on rival Telefonica on its home ground.
Telefonica is expected to roll out fibre to seven million Spanish homes by the end of the year, while rivals Orange and Vodafone will fail to reach half that. Buying Ono would allow Vodafone to match the Telefonica roll-out.
Ono's network would provide Vodafone with both backhaul and potentially more sensible offload options. Ono has a good brand, and a very strong fixed telephone and subscription TV offer. It would, however, be likely that Vodafone would phase out the brand over time. Ono has 1.5m customers which would take Vodafone’s cable customers to 2.4m, with speeds of 100 and 200MB/s
The takeover would mirror Vodafone’s £6.6bn (€7.7bn) purchase of Kabel Deutschland last September.