Zegona moves to double stake in Euskaltel

Cable and telecom investment group Zegona Communications has moved to double its stake in Spanish regional cable operator Euskaltel by making a tender offer for up to 14.9% of the company.

Zegona is offering €7.75 a share or a premium of 18%, in a move that could see it double its existing 15% stake in Euskaltel, which operates networks in the northern Spanish regions of the Basque Country, Asturias and Galicia.

Zegona said in a statement that Euskaltel was in a strong position to deliver profitable growth and that there is potential to create additional value by driving efficiency improvements as well as increasing revenue in the company’s core regional markets as well as to expand its reach into new geographical markets.

Zegona chairman and CEO Eamonn O’Hare said that the offer, which would take the UK-based investment outfit’s stake in Euskaltel to 29.9%, “underlines our belief in the future potential of the Euskaltel business” and added that Zegona saw opportunities where “our industry knowledge and experience could be valuable” to the company.

The acquisition of an additional 14.9% would see Zegona displace Basque Country bank Kutxabank as Euskaltel’s leading investor. Kutxabank currently has a 21% stake in the operator. Zegona will also seek additional board representation if its tender is successful.

Zegona, which has previously been critical of Euskaltel’s performance following its acquisition of its 15% stake through the merger of Euskaltel and Zegona-owned Asturias operator Telecable, said it has been in talks with former Jazztel CEO José Miguel García to join the Euskaltel leadership team.

The investment outfit has also highlighted its relationship with Virgin Group – O’Hare was formerly chief financial officer at Virgin Media – and the possibility of Euskaltel using the Virgin brand to expand in presence in other regions in Spain. Euskaltel has taken initial steps to expand outside its core regions by offering services in Navarre via Orange’s network.

Zegona is funding the proposed acquisition through a non-institutional placing of shares to raise up to €225 million.