Telenor will sell a stake in its IoT services and connectivity division Telenor Connexion to Verdane and establish a 50/50 ownership structure for the unit. The transaction values Telenor Connexion at SEK 7.5 billion.
The deal gives Telenor Connexion access to long-term growth capital through an efficient ownership structure, while Telenor receives approximately SEK 3.8 billion in cash plus a seller credit of approximately SEK 0.8 billion.
Terms: SEK 7.5bn valuation and a 50/50 structure
Under the transaction, Telenor will sell a stake in Telenor Connexion to Verdane and create a jointly owned company with 50/50 percent ownership. The divestment values Telenor Connexion at an enterprise value of SEK 7.5 billion.
Telenor expects to receive approximately SEK 3.8 billion in cash and a seller credit of approximately SEK 0.8 billion. The firms have also committed to invest an additional SEK 2 billion in Telenor Connexion.
Deal economics: cash, earn-out and new debt
Telenor Connexion generated revenues of around SEK 1.3 billion and delivered an EBITDA of around SEK 415 million on a pro-forma basis last year. The deal includes a potential earn-out if the company meets certain commercial targets, which the analysis estimates increases the company’s enterprise value by SEK 0.3 billion.
The transaction is expected to incur approximately SEK 2.2 billion in new bank debt. On that basis, the expected post-transaction equity value for Telenor Connexion is approximately SEK 5.3 billion.
Assets, leadership and scale across markets
Telenor Connexion has been operating for 25 years and trades in IoT solutions for cars, water pumps and robotic lawn mowers. The unit has 31 million IoT SIM cards in operation and delivers to more than 200 countries.
Once the deal is done, Pekka Lundmark—former President and CEO of Nokia—will join Telenor Connexion as Independent Chair, while Mats Lundquist will continue as Chief Executive Officer. The board will include two representatives from each owner plus the independent chair.
Expected timing and regulatory gate
The transaction is expected to complete this year, subject to various regulatory approvals. If the deal completes, Telenor Connexion will be reported as an associated company of Telenor Group, and Telenor and Verdane will operate through the jointly owned 50/50 company.
Benedicte Schilbred Fasmer, President & CEO of Telenor, said the partnership with Verdane provides “additional power” to realise managed IoT ambitions “in a much more capital efficient manner,” and that Telenor will remain a long-term, strategic owner of Telenor Connexion.