CDPQ and OMERS Expand Their European Telecom Portfolio
Today, American Tower Corporations (ATC) has announced that they have struck a deal with Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) for the sale of a 30% stake in their European business, ATC Europe.
The transaction will be for €1.6 billion, giving ATC Europe a total valuation of €8.8 billion.
ATC will retain managerial and operational control of ATC Europe, while CDPQ will gain seas on the company’s Board of Directors and certain governance rights.
The deal comes a number of months after ATC signed a $9.4 billion deal with Telefonica to acquire their independent tower infrastructure company Telxius, which has tower assets in both Europe and Latin America. The acquisition, which is still pending, will see ATC’s European tower portfolio increase in size to around 30,000 communications sites.
"We are pleased to partner with CDPQ in Europe, where we expect to create tremendous value. CDPQ's extensive infrastructure experience, deep knowledge of the region and long-term investment philosophy are in close alignment with American Tower's European strategy, operational excellence and long track record of historical success,” said American Tower’s president and CEO, Tom Bartlett. “This transaction not only contributes to the funding of our pending Telxius acquisition, which will transform our scale and leadership position in highly attractive markets like Germany and Spain, but also creates a solid, adaptable framework through which future expansion opportunities can be evaluated and financed."
The deal is expected to close in the third quarter of 2021, subject to regulatory approval.
For CDPQ, this move represents their growing interest in the telecommunications infrastructure at an international level. While the fund already has various telecoms infrastructure assets under its wing, perhaps the clearest indication of their telecoms focus in recent years came in March earlier this year, when the pension fund stuck a deal with Telefonica to launch a 50-50 wholesale joint venture in Brazil, set to be named FiBrasil.
The investor’s interest in the telecoms sector has not gone unnoticed, with struggling Indian telco Vodafone Idea noting CDPQ as one of a number of pension funds they were approaching to help them raise $1 billion to stay afloat.
Telecoms infrastructure investments have become a very hot topic over the past year, with operators around the world offloading their tower infrastructure in order to raise money for expensive fibre and 5G rollouts. Cellnex’s €9 billion purchase of CK Hutchison’s European tower assets last year was perhaps the trend’s biggest example, but there are numerous examples of similar transactions, from Vodafone preparing to float its tower subsidiary Vantage Towers, to MTN selling its towers in South Africa and Indosat selling theirs in Indonesia.
Earlier today, CDPQ put out this press release covering this deal:
American Tower Corporation (NYSE: AMT) and Caisse de dépôt et placement du Québec (CDPQ), a global investment group, today announced that CDPQ will acquire a 30% stake in ATC Europe as part of a new long-term strategic partnership through a transaction valued at over €1.6 billion, implying an enterprise value of more than €8.8 billion for ATC Europe. Pursuant to the partnership agreement, American Tower will retain managerial and operational control, as well as day-to-day oversight of ATC Europe, while CDPQ will obtain seats on ATC Europe’s Board of Directors, along with certain governance rights.
The transaction will position American Tower and CDPQ to jointly benefit from sustainable, long-term secular wireless growth trends in select European markets as 5G deployments and demand for communications infrastructure accelerate. ATC Europe’s portfolio, pro forma for the closing of American Tower’s pending Telxius acquisition, will consist of nearly 30,000 communications sites.
Tom Bartlett, American Tower’s President and Chief Executive Officer, stated, “We are pleased to partner with CDPQ in Europe, where we expect to create tremendous value. CDPQ’s extensive infrastructure experience, deep knowledge of the region and long-term investment philosophy are in close alignment with American Tower’s European strategy, operational excellence and long track record of historical success. This transaction not only contributes to the funding of our pending Telxius acquisition, which will transform our scale and leadership position in highly attractive markets like Germany and Spain, but also creates a solid, adaptable framework through which future expansion opportunities can be evaluated and financed.”
Emmanuel Jaclot, CDPQ’s Executive Vice-President and Head of Infrastructure, said, “Through this new long-term strategic partnership with American Tower, CDPQ is thrilled to play an active role in establishing one of Europe’s largest independent communications infrastructure providers. This dedicated growth platform with a global leader enables us to increase our exposure in key European markets — including Germany, France and Spain — while contributing to the development of critical carrier-neutral telecom networks, at a time where telecommunications needs are more important than ever.”
BofA Securities, Inc. and CDX Advisors are serving as financial advisors to American Tower. HSBC is serving as financial advisor to CDPQ. The transaction is expected to close in the third quarter of 2021, subject to customary closing conditions, including regulatory approvals.
Cautionary Language Regarding Forward-Looking Statements
This press release contains statements about future events and expectations, or “forward-looking statements,” all of which are inherently uncertain. We have based those forward-looking statements on management’s current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, statements regarding the proposed closing of the transaction described above and the value and future investment activities of ATC Europe. These forward-looking statements involve a number of risks and uncertainties. For important factors that may cause actual results to differ materially from those indicated in our forward-looking statements, we refer you to the information contained in Item 1A of our Form 10-K for the year ended December 31, 2020 under the caption “Risk Factors” and in other filings we make with the Securities and Exchange Commission. We undertake no obligation to update the information contained in this press release to reflect subsequently occurring events or circumstances.
About American Tower
American Tower, one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of approximately 187,000 communications sites. For more information about American Tower, please visit the “Earnings Materials” and “Investor Presentations” sections of our investor relations website at www.americantower.com.
About CDPQ
At Caisse de dépôt et placement du Québec (CDPQ), we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public retirement and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2020, CDPQ’s net assets total CAD 365.5 billion. For more information, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages.
Why is telecom so big now? As the first article notes, Telecoms infrastructure investments have become a very hot topic over the past year, with operators around the world offloading their tower infrastructure in order to raise money for expensive fibre and 5G rollouts.
American Tower is paying 7.7 billion euros ($9.4 billion) cash for about 30,700 tower sites in Spain, Germany, Brazil, Peru, Chile and Argentina held by Telefonica unit Telxius Telecom. This marks the biggest threat yet to Cellnex Telecom SA, Europe’s biggest independent tower operator.
American Tower had been evaluating dozens of deals across Europe for years but never found the right fit in terms of assets and prices, Chief Executive Officer Tom Bartlett said on a call with analysts Wednesday. With the Telefonica deal, AMT gets “premier assets” in Germany and Spain that will weave in well with the towers the company already controls in France, Bartlett said.
Most of the Telefonica towers have as few as one tenant, and as a neutral host, AMT can take advantage of that by adding other carriers to the array, Bartlett said.
“We expect to get an outsized share of the market over the next several years,” the AMT CEO said.
The arrival of AMT comes as European carriers prepare a major network upgrade to 5G technology and have sought to sell towers to help finance those costs.
Cellnex has snapped up assets across the region without much interference from U.S. rivals, including CK Hutchison Holdings Ltd.’s European masts for around 10 billion euros ($11.8 billion) in November. American Tower, along with fellow U.S. operator Crown Castle International Corp., had largely stayed away from Europe, at least until carriers started spinning off tens of thousands of masts to cut debt and pay for costly 5G rollouts.
For Telefonica, whose shares jumped as much as 11%, it will help cut a 37 billion-euro debt pile, one of the biggest in the industry.
U.S. private equity firm KKR & Co. owns 40% of Telxius and Spanish billionaire Amancio Ortega owns close to 10% through his investment vehicle. The main pressure point for Cellnex is the foothold American Tower gains in Germany, the one big European market where the Spanish company is still absent.
Germany is a “real crown jewel in the marketplace” especially as the region takes a “leadership position” in building out 5G, Bartlett said.
American Tower said it would pay for the towers in a way that preserves its investment grade credit rating, and has raised financing from Bank of America Corp.
The U.S. company has focused mostly on building towers in Africa, Latin America and India to sustain its international growth. In 2019 it bought Eaton Towers Ltd. for about $1.85 billion including debt to expand in Africa. American Tower and Telefonica already have partnerships in Brazil in optic fiber networks.
Telefonica Windfall
Telefonica said it expects to book a capital gain of around 3.5 billion euros and cut its net debt by about 4.6 billion euros.
Telefonica’s shares were up 9.6% as of 3:40 p.m. in Madrid after rising as much as 11%, the biggest intraday gain since November. Cellnex was up 0.6% after initially falling as much as 2.4%.
Phone companies in the region have been reluctant to lose control of the assets, seeing them as strategically important. The deal on Wednesday shows how some are willing to rethink that approach in an effort to reduce costs and raise cash.
Vodafone Group Plc, Europe’s biggest wireless carrier, is working on an initial public offering of its tower unit in the first half of the year. Orange SA also plans to create a stand-alone tower operating unit.
Interestingly, back in March, Telefónica Group and CDPQ reached an agreement for the
construction, development and operation of a neutral and independent
optical fibre wholesale network in Brazil with the creation of FiBrasil
Infraestrutura e Fibra Ótica SA (“FiBrasil”).
One of Canada's biggest pension funds is plotting a bid for a big stake in CityFibre Holdings, the telecoms infrastructure group targeting a £4bn investment programme by 2025.
Sky News has learnt that the Ontario Municipal Employees' Retirement System (OMERS) is among a number of parties vying to become a major financial backer of Britain's superfast broadband rollout.
Insiders said on Wednesday that OMERS had indicated a desire to bid on its own for up to 30% of CityFibre, with existing shareholders West Street Infrastructure Partners and Antin Infrastructure Fund holding 35% each.
A successful bid would add CityFibre to a portfolio of UK assets part-owned by OMERS which includes the cinema chain Vue Entertainment and Lifeways, a healthcare provider.
Banking sources said that OMERS would bid against several consortia which are in the process of being formed by rival infrastructure funds.
The stake could cost a winning bidder close to £1bn, valuing the whole of CityFibre at more than £3bn, they added.
Sky News revealed last month that CityFibre had appointed the investment banks UBS and Rothschild to identify a third investor to join West Street - which is backed by Goldman Sachs - and Antin.
In a statement last month, CityFibre said: "We can confirm that we're exploring a possible expansion of our shareholder base to support the acceleration of our build and possible participation in the BDUK [Building Digital UK] rural programme."
CityFibre and OMERS both declined to comment further on the process.
CityFibre, which last year bought the infrastructure arm of TalkTalk, has pledged to invest up to £4bn to deploy a full-fibre network that would reach up to 8m premises by 2025.
Such a programme would make the company the largest independent full-fibre platform in the country, and second only to Openreach, which operates at arm's length from its parent company, BT Group.
The company says that once completed, its network will serve approximately 800,000 businesses, 400,000 public sector sites and 250,000 5G access points.
CityFibre is either building or mobilised in 67 towns and cities, with more than half a million homes now ready for services.
It recently said it was extending its infrastructure to a further 216 towns and villages across the country.
The company has agreements with Vodafone, TalkTalk, Zen and a growing number of other internet services providers across the country to sell services over its networks.
A CityFibre insider said it was now "building at pace due to the favourable regulatory environment developed by [industry regulator] Ofcom for competitive infrastructure investment".
The company is run by Greg Mesch, its chief executive, and chaired by Steve Holliday, the former National Grid boss.
It has outlined plans to create 11,000 jobs over the next three years to deliver its expansion plan.
A string of smaller players, including Hyperoptic and Gigaclear, have also been set up in recent years to deliver full-fibre connections, prompting analysts to question how many of the new companies are likely to be financially successful.
If successful, OMERS will own a 30% stake in CityFibre, UK's largest independent full-fibre platform.
The stake could cost the winning bidder close to £1bn, valuing the whole of CityFibre at more than £3bn.
That £1 billion represents CA$1.7 billion, or 1.6% of OMERS’ CA$105 billion of total assets, no small chunk of change.
Both CDPQ and OMERS (if bid comes through) will own a stake in major telecom platforms in Europe.
Both pensions are partnering up with solid companies that are going to maintain operational control of these investments.
What do these companies get in return, partnering up with Canadian pensions? They get long-term investors allowing them to diversify their financial risk to expand their operations elsewhere.
For their part, Canada's large pensions get a significant stake in leading companies allowing them to build their respective telecom infrastructure platform in Europe, diversifying their infrastructure portfolio geographically and by sector (most are way overexposed to transportation infrastructure).
Alright, I think I covered a lot, if you have any additional thoughts, feel free to email me at LKolivakis@gmail.com.
Those of you who want to read more on why the future looks bright for bright for European carve-outs in the wireless towers sector can download a great report by TowersXchange here.
Below, American Tower (NYSE: AMT) is a leading provider of wireless and broadcast communications infrastructure. Their solutions include wireless and broadcast towers, in-building and outdoor Distributed Antenna Systems (DAS), managed rooftops and services that speed network deployment. With a global portfolio of approximately 170,000 communications sites, they are committed to partnering with our customers to develop customized network solutions.
Also, CityFibre is building a network that stands for whatever the future brings. See why OMERS is a bidding for a 30% stake in this leading telecom company.
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