Prysmian’s Strategic Divestment in YOFC: A Calculated Move to Fuel Growth and Shareholder Value

Prysmian Group’s decision to divest a 5.0% stake in Yangtze Optical Fibre and Cable (YOFC) for EUR79 million in July 2025 marks a pivotal shift in its capital allocation strategy. By reducing its ownership from 20% in 2024 to 10% by mid-2025, the Italian industrial giant has signaled its intent to exit a volatile Chinese telecom market plagued by regulatory uncertainty, overcapacity, and margin compression [1]. This move, part of a three-step plan, underscores Prysmian’s focus on high-growth infrastructure sectors, particularly in the U.S., where it has acquired Channell, a 5G and undersea cable manufacturer [1].

The divestment’s strategic rationale is clear: to mitigate risks in a sector where YOFC’s profitability has been eroded by aggressive price competition and shifting regulatory priorities. By reallocating capital to Channell, Prysmian is tapping into the U.S. broadband and energy transition megatrends. The acquisition is projected to add €300 million in annualized revenue and push EBITDA margins beyond 17% by 2025, aligning with the company’s broader goal of scaling its high-margin infrastructure portfolio [2]. This reallocation also supports a €17 billion project backlog, ensuring sustained growth in markets with stronger demand visibility [2].

The financial implications of this strategy are already materializing. Prysmian’s Q2 2025 EBITDA surged to €605 million, a 29.1% increase from €457 million in the same period in 2024, driven by Channell’s integration and strong performance in its Transmission segment [2]. The company raised its full-year EBITDA guidance to €2.3 billion–2.38 billion, reflecting confidence in its new portfolio. Shareholders have responded positively, with the stock rising 0.73% post-earnings despite a 1.01% revenue miss, indicating trust in management’s capital allocation discipline [1].

However, the leveraged nature of the Channell acquisition—pushing net debt to €4.9 billion—has raised questions about financial flexibility. Critics argue that the debt-to-EBITDA ratio, while still below 3.5x (investment-grade territory), leaves little room for further expansion without dilution [1]. Yet, Prysmian’s fixed-rate debt structure and AA- credit rating provide a buffer against interest rate volatility, preserving its credit profile [3]. The company has also demonstrated prudence by using asset sales and low-cost perpetual bonds to fund the deal, avoiding shareholder dilution [2].

The EPS beat in Q2 2025 (€0.9904 vs. €0.9848 forecast) and the 57.2% organic revenue growth in its Transmission segment highlight the immediate benefits of this reallocation [1]. With Channell contributing €50–70 million annually to EBITDA and a trailing 12-month free cash flow of €998 million, Prysmian is balancing short-term stability with long-term growth [1].

In conclusion, Prysmian’s divestment in YOFC and reinvestment in Channell exemplify a disciplined approach to capital reallocation. By exiting a low-growth, high-risk market and doubling down on U.S. infrastructure, the company is positioning itself to capitalize on digital and energy transition trends. While debt levels warrant monitoring, the strategic alignment with high-margin sectors and strong cash flow generation suggest that this move will enhance shareholder value over the medium to long term.

Source:
[1] Prysmian's Strategic Divestment of YOFC Stake, [https://www.ainvest.com/news/prysmian-strategic-divestment-yofc-stake-calculated-move-capital-efficiency-long-term-growth-2507/]
[2] Prysmian's Debt-Driven Expansion: Leveraging Hybrid ..., [https://www.ainvest.com/news/prysmian-debt-driven-expansion-leveraging-hybrid-financing-strategic-divestitures-capture-infrastructure-megatrends-2508]
[3] Italy's Prysmian raises full-year outlook on Channell ... [https://www.sahmcapital.com/news/content/italys-prysmian-raises-full-year-outlook-on-channell-acquisition-2025-07-31]