Zegona sets a new millionaire bonus for executives in the ‘Vodafone operation’

‘Buy, fix, sell’. The first step of Zegona’s strategy with Vodafone Spain has already been completed. Now there are the next two. The last one will have a prize for the management leadership, led by Eamonn O’Hare, if it implies a good economic return after disbursing up to 5,000 million euros for the acquisition. This bonus will be similar to the one set upon entry into Euskaltel and which allowed them to pocket nearly 30 million euros. This incentive scheme will allow you to collect up to 15% of the revaluation achieved over time. This plan will be apart from that set for the teleco’s own executive team, to which the British fund wants to incorporate José Miguel García as CEO.

The management team of the British have received shares that give each of the executives the right, subject to certain provisions, “to receive up to a maximum of 15% of the growth in value” of the company. But it has an essential condition: that the firm’s shareholders achieve a specific preferred return. Specifically, 5% annually on your net invested capital. It is a payment similar to the ‘success commission’ that managers have with typical venture capital funds. Among those partners of the British listed company are not only the two co-founders, who controlled 27% of the shares before the capital increase, but also the British investment funds Marwyn and Artamis, along with Fidelity and Credit Suisse.

As reflected in the capital increase prospectus, the rights linked to the shares of the executive team may be exercised by the directors at any time during the period between October 14, 2024 and October 14, 2026. This mechanism It may be renewed up to a maximum of two times, provided that the 5% profitability for the partners is met. This new issuance of securities with which the acquisition of Vodafone Spain will be partially financed would not affect this incentive scheme, although what is received will increase the amount of net capital invested for the purposes of calculating this return on shareholders.

This type of incentives logically reward the increase in value but are unlocked with the sale of most of the assets -Zegona is a kind of ’empty drawer’ in which all the subsidiaries and Vodafone business in Spain will be inserted. – or with the return of income for shareholders – with, for example, a dividend after the sale of fixed assets or others. The company’s objective is to try to ‘tighten the screws’ of the third largest telecommunications operator by revenue in Spain to sell it in a future second wave of consolidation.

This ‘fix’ phase in the British strategy with Vodafone Spain includes more aggressive optimization, cutting and growth measures to try to improve its situation to make it more attractive in the face of a potential sale. In this sense, the firm has advanced that among the movements are reductions in the workforce, with “selective” layoffs; the reduction in customer acquisition costs; the potential ‘resurrection’ of the plan to make money with the fixed network; managing bad debts or renegotiating television content (or growing the wholesale business).

The bonus with Euskaltel

Euskaltel is its main mirror. Zegona entered the Basque operator after it acquired 100% of the shares of Telecable, of which they were owners. His plan was to try to improve the numbers and adjust costs. Finally, Másmóvil launched a public acquisition offer (OPA) in 2021 for 2,000 million. And this precisely unlocked a very relevant bonus for the leadership. Specifically, as reflected in its official documentation, the British manager gave close to 30 million euros in exchange. O’Hare pocketed 15.2 million pounds, while Robert Samuelson added 7.6 million.

This incentive that is now renewed for British managers must be added to the one that will be implemented in the new leadership of Vodafone Spain, in which there will be a relevant renewal with the departure of the current CEO, Mario Vaz. The possibility of incorporating José Miguel García, former CEO of Jazztel and Euskaltel, is being negotiated, although he still maintains a ‘non-compete’ contract with Másmóvil that is already being addressed by all parties. The manager reserved 28% of the almost 30 million that were distributed among all the managers in the takeover bid.

Today Vodafone is in a certain interim situation in Spain after the acquisition announcement. The transition will last for the next few months. According to the deadlines managed by Zegona itself, authorization by the Executive and the final details of the transaction will arrive in the first months of 2024. The ideal would be the ‘transfer of portfolios’ before the end of March. Meanwhile, the executive committee led by Vaz remains in place.