Telefónica wants €100 million-plus for logistics business

Telefónica is pushing ahead with debt-reduction efforts and this time it is logistics business Zeleris that is up for grabs.

So claims Spanish business publication CincoDias, which cites unnamed sources as saying Telefónica has received initial offers from the private equity space for Zeleris, its M&A advisor having been touting the business for the past few months. However, Telefónica wants at least €100 million for the asset and the non-binding bids offered up so far have not reached that level, they claim. The only interested party named by the paper was US-based investment firm HIG Capital.

Reuters’ sources shared the same €100 million figure, noting that Zeleris had been valued at that level by EY.

As you might expect, there has been no official comment on the story from Telefónica. However, a plan to sell Zeleris would come as no surprise, given the Spanish telco’s ongoing debt-reduction initiative, its monetisation of non-core assets – further evidence of that came with last week’s data centre dealings – and, as CincoDias explains, a boom in the logistics space in the wake of Covid-19 and related growth in online shopping.

Zeleris’ roots lie in managing the delivery and distribution of mobile devices on behalf of Telefónica, but morphed into a global logistics business as the smartphone purchasing model changed; it claims to have a workforce of 1,200 across 220 countries serving 1,400 customers. According to the paper, it turned a profit of more than €10 million in 2019, its biggest in more than a decade, while revenues grew by 17% to €424 million. Bearing in mind that was before the onset of Covid-19, there is little wonder that Telefónica is apparently unwilling to budge on price.

The paper notes that around 70% of its revenues from the distribution of mobile phones and related items, but new businesses, such as distribution and logistics service to third parties and its repair service for electronic devices – Telefónica talked up the latter in its 2020 annual report as part of the Right to Repair of the European Green Deal – are helping to drive turnover and profits. Gieven Telefónica’s current position, it seems like a decent time to sell.

Telefónica ended the first quarter of 2021 with €35.8 billion in net financial debt, down 6.4% on the previous year’s figure. It expects to book an additional €9 billion-plus in net debt reduction in the current quarter as a result of its planned joint venture with Virgin Media in the UK and sale of its Telxius Towers business to American Tower – the pair agreed a sizeable €7.7 billion deal in January – which would lower its debt to half of what it was five years ago, the telco said.

While €100 million for Zeleris seems like a drop in the ocean compared with sums like that, it all adds up.

And Zeleris is apparently not the only asset on the chopping block. CincoDias notes that Telefónica’s submarine cable business – which is housed in Telxius but does not form part of the American Tower deal – has been put up for sale by Société Générale and Greenhill. Various Spanish press reports last year put the value of that asset at around the €2 billion mark.

Telefónica’s non-core assets portfolio still includes some solid businesses with strong growth potential. It is unlikely to let monetisation opportunities pass it by.