Telefonica’s Telxius Valued Up to 3.75 Billion Euros in IPO

  • Shares of infrastructure unit offered at 12-15 euros each
  • Investors sought lower valuation for submarine assets

Telefonica SA offered to sell up to 40 percent of its Telxius unit in an initial public offering that values the infrastructure business at as much as 3.75 billion euros ($4.19 billion), a range that suggests the Spanish telephone company may reap less than it wanted as it tries to pay down debt.

The price of 12 euros to 15 euros per share for Telxius Telecom SA gives a range with a midpoint of 3.38 billion euros for the unit’s overall value, below the 3.5 billion euros Telefonica sought.

That suggests Telefonica, which is selling stakes in its businesses to reduce debt, could walk away with as little as 1.2 billion euros before fees. The Telxius deal faces investor concern because of doubts about how to assess the division’s submarine cable assets, people with knowledge of the matter said Monday. The share sale will also be an early test of investors’ appetite for new listings after the U.K.’s decision to leave the European Union roiled stock markets this summer.

“The price is in line with what we think it is valued," Guy Peddy, an analyst at Macquarie Group, said by phone. “Price is less important here, what is important is delivering" the offering.

Telxius will pay dividends of at least 40 percent of its recurrent cash flow, it said in the prospectus filing. The pricing will be fixed on Sept. 29, with shares starting to trade on Oct. 3. The price range was reported earlier by Expansion.

Potential investors sought to put a lower price on Telxius’s submarine operations, which make up about 60 percent of revenue and profit, than the multiple they were willing to pay for the unit’s wireless towers, people familiar with the matter said this week. Telefonica created the division earlier this year as it mapped out its debt-reduction plans.

Telefonica, with a debt load of about 53 billion euros, has been forced to revise its deleveraging strategy after EU regulators blocked the sale of its U.K. wireless business for as much as 10.25 billion pounds ($13.3 billion) this year. The parent company has hired Morgan Stanley to work on an IPO of the carrier, O2, people familiar with the matter said this month.

Telefonica was little changed at 9.23 euros as of 1:51 p.m. in Madrid. The shares have declined 9.9 percent this year.

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