By Isla Binnie
MADRID (Reuters) - Spain's Telefonica (MC:TEF) has agreed to sell a 10 percent stake in its masts unit Telxius to the holding company of Amancio Ortega, Europe's richest man and founder of fashion chain Zara, the telecoms firm said on Friday.
Ortega's family-run holding Pontegadea will pay 378.8 million euros (335.78 million pounds) in a deal which will help Telefonica to keep chipping away at a debt pile that was more than 2-1/2 times its core profit at the end of last year.
Telefonica said the sale, which values Telxius shares at around 19 percent more than private equity firm KKR (N:KKR) agreed to pay for a stake last February, would also contribute to maintaining sustainable returns for shareholders.
Mast firms have traditionally been a popular target for private equity firms because of their steady cash flows.
Ortega's investment will sit in his portfolio alongside prime commercial real estate in top-end shopping and office districts in cities including London, New York and Madrid.
The 82-year-old billionaire uses dividend income from his majority stake in Zara owner Inditex (MC:ITX) to invest in commercial real estate. Pontegadea groups a 50.01 percent stake in Inditex alongside nearly 9 billion euros worth of property. Ortega has bought into listed companies in the past, including a stake in NH Hotel Group (MC:NHH), which he sold four years ago.
In a conference call to present financial results on Thursday, Telefonica Chief Executive Jose Maria Alvarez-Pallete said the company had cut net debt for the past five quarters in a row, and planned to keep reducing it further.
Telefonica will remain Telxius's biggest shareholder and maintain operational control of the unit.
On the Madrid stock exchange, Telefonica's shares were little changed on the day after the Telxius announcement, having gained more than 3 percent after Thursday's results.