PSP and EQT Acquire Radius Global Infrastructure in a $3 Bn Take Private Deal
Canada’s Public Sector Pension Investment Board (PSP) has teamed up with EQT Active Core Infrastructure to buy telecommunications cell sites owner Radius Global Infrastructure in a $3bn (€2.8bn) deal .
The C$230bn (€160bn) Canadian investor and the EQT-managed fund are planning to take Radius private by offering the NASDAQ-listed firm’s shareholders $15 per share, a 28% premium to the stock’s last closing price prior to the announcement.
Radius owns and acquires digital infrastructure, including ground, tower, rooftop and in-building cell sites, in over 20 countries across North and South America, Europe, and Australia. The company owns a portfolio of 9,000 leases across nearly 7,000 sites.
Patrick Charbonneau, senior managing director and global head of infrastructure investments at PSP, said Radius is a strong fit with PSP’s portfolio and mandate given it has “inflation-adjusted contracted income, little exposure to GDP, and substantial growth opportunities” linked to demand for digital services.
The deal represents the first investment for EQT’s longer-hold fund targeting core infrastructure companies that provide essential services mainly in Europe and North America.
The private markets manager is seeking to raise €5bn for EQT Active Core Infrastructure, a fund expected to be held for 15 to 25 years and focus on core infrastructure companies at the lower end of the risk-return spectrum.
Alex Greenbaum, partner within EQT Active Core Infrastructure’s advisory team, said the acquisition aligns directly with the fund’s investment criteria and thematic approach to investing, adding that Radius’ “strong cash flows, sticky customer base, geographically diverse portfolio and inflation protection” make the company a strong fit for the fund.
Bill Berkman, CEO of Radius, said: EQT’s global presence and hands-on approach will enable Radius to accelerate origination activity and further invest in both geographic expansion and adjacent asset opportunities.
“With EQT and PSP’s support, we will continue to be a strong and collaborative partner for our tenants as we continue to grow Radius as the premier global aggregator and owner of digital infrastructure-oriented real property assets.”
Canadian Property Management also reports PSP Investments to acquire digital infrastructure:
Canada’s Public Sector Pension Investment Board (PSP Investments) and EQT Active Core Infrastructure will jointly acquire Radius Global Infrastructure, a multinational aggregator and owner of properties leased to wireless communications and other digital infrastructure operators. The partners will retain the Radius brand and take the company private through a cash deal of USD $15 per share, valued at approximately USD $3 billion (CAD $ 4 billion).
“Radius is a strong fit with PSP’s portfolio and mandate given it has inflation-adjusted contracted income, little exposure to GDP and substantial growth opportunities linked to demand for digital services,” says Patrick Charbonneau, PSP’s global head of infrastructure investments.
Radius management will continue to operate the company, which holds interests in the revenue streams of nearly 9,190 digital assets located on more than 7,020 different communications sites in 21 countries. About two thirds of that portfolio is in Europe with about 18 per cent in Canada and the United States and the remainder in Latin America.
“Partnering in a private capital context with EQT and PSP, both of which have significant expertise in communications infrastructure, will enable Radius to accelerate origination activity and further invest in both geographic expansion and adjacent asset opportunities,” says Bill Berkman, co-chair and chief executive officer of Radius.
The transaction is expected to close in the third quarter of 2023.
PSP Investments issued a press release last week on this transaction stating that along with EQT Active Core Infrastructure, they acquired Radius Global Infrastructure for $15 a share cash:
NEW YORK - Mar. 1, 2023 - Radius Global Infrastructure, Inc. (NASDAQ: RADI), (“Radius”), EQT and Public Sector Pension Investment Board (“PSP”) announced today that they have entered into a definitive agreement under which EQT Active Core Infrastructure and PSP will indirectly acquire Radius for $15.00 per share in cash, representing a total enterprise value of approximately $3.0 billion.
Radius is a leading global aggregator of real property interests underlying wireless telecommunications cell sites and other digital infrastructure assets. EQT is a purpose-driven global investment organization. PSP is one of Canada’s largest pension investment managers.
The purchase price represents a premium of 28% over the unaffected closing price of Radius shares on February 24, 2023, and a premium of 31% to the volume-weighted average price of Radius shares over the last 90 days.
“This transaction is both an exciting next step for Radius and a great outcome for shareholders as it provides compelling value,” said Bill Berkman, Co-Chairman and CEO of Radius. “Partnering in a private capital context with EQT and PSP, both of which have significant expertise in communications infrastructure, will enable Radius to accelerate origination activity and further invest in both geographic expansion and adjacent asset opportunities. I want to thank the incredible Radius team for their commitment and success in building the platform we have today. With EQT and PSP’s support, we will continue to be a strong and collaborative partner for our tenants as we continue to grow Radius as the premier global aggregator and owner of digital infrastructure-oriented real property assets.”
Alex Greenbaum, Partner within EQT Active Core Infrastructure’s Advisory Team, said, “Radius is one of the market leaders in the aggregation of digital infrastructure sites and we believe it will benefit from long-term tailwinds supported by growing demand for data. This acquisition aligns directly with EQT Active Core Infrastructure’s investment criteria and thematic approach to investing - Radius’ strong cash flows, sticky customer base, geographically diverse portfolio and inflation protection make the Company a strong fit for the fund. We look forward to partnering with the entire Radius team as they continue their strong growth trajectory.”
“PSP is thrilled to participate in this exciting acquisition of Radius Global Infrastructure,” said Patrick Charbonneau, Senior Managing Director and Global Head of Infrastructure Investments at PSP. “Radius is a strong fit with PSP’s portfolio and mandate given it has inflation-adjusted contracted income, little exposure to GDP, and substantial growth opportunities linked to demand for digital services. I want to thank EQT who brings valuable expertise to help this partnership reach its full potential and I look forward to working with the excellent management team at Radius to support their continued delivery of value-accretive products to their customers.”
Transaction Approvals and Timing
The Radius Board of Directors, upon the recommendation of a Transaction Committee comprised of independent directors, has unanimously approved the transaction, and the transaction is not subject to a financing condition. It is expected to close in the third quarter of 2023, subject to satisfaction of customary closing conditions including the receipt of certain regulatory approvals and approval by Radius shareholders, as well as certain other conditions related to Radius’ indebtedness and available cash. Radius has obtained consents to the transaction from certain of its lenders. Certain Radius shareholders, including Mr. Berkman, Centerbridge Partners, L.P., Imperial Landscape Sponsor LLC, TOMS Acquisition II LLC and their respective affiliated entities, as applicable, have entered into agreements to vote their combined 21% ownership in favor of the transaction.
Upon completion of the transaction, Radius will be a privately held company indirectly wholly owned by EQT Active Core Infrastructure and PSP, as well as Radius management. Radius shares will no longer be listed on any public securities exchange. Radius will retain its name and brand and will continue to be operated by its existing management team and employees worldwide.
Advisors
Citi is serving as lead financial advisor, Goldman Sachs & Co. LLC is serving as financial advisor and Cravath, Swaine & Moore LLP is serving as legal advisor to Radius. Barclays is serving as financial advisor and Morris, Nichols, Arsht & Tunnel LLP is serving as legal advisor to the Transaction Committee of the Board of Directors of Radius.
Morgan Stanley & Co. LLC and Simpson Thacher & Bartlett LLP are serving as financial and legal advisors, respectively, to EQT Active Core Infrastructure. Evercore and Weil, Gotshal & Manges LLP are serving as financial and legal advisors, respectively, to PSP.
Earnings Announcement
Radius will release fourth quarter and full year 2022 financial results later today.
About Radius
Radius Global Infrastructure, Inc., through its various subsidiaries, is a multinational owner and acquiror of triple net rental streams and real properties leased to wireless operators, wired operators, wireless tower companies, and other digital infrastructure operators. As of December 31, 2022, Radius had interests in the revenue streams of approximately 9,188 assets that were situated on approximately 7,024 different communications sites located throughout the United States and 20 other countries. Annualized contractual revenue from the rents expected to be collected on the leases in-place at that time from the assets was approximately $157.6 million. For more information, please visit www.radiusglobal.com.
About EQT
EQT is a purpose-driven global investment organization with EUR 113 billion in assets under management within two business segments – Private Capital and Real Assets. EQT owns portfolio companies and assets in Europe, Asia-Pacific and the Americas and supports them in achieving sustainable growth, operational excellence, and market leadership.
For more information, please visit www.eqtgroup.com.
About PSP Investments
The Public Sector Pension Investment Board (PSP Investments) is one of Canada’s largest pension investment managers with $230.5 billion of net assets under management as at March 31, 2022. It manages a diversified global portfolio composed of investments in capital markets, private equity, real estate, infrastructure, natural resources and credit investments. Established in 1999, PSP Investments manages and invests amounts transferred to it by the Government of Canada for the pension plans of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York, London and Hong Kong.
For more information, visit www.investpsp.com or follow us on Twitter and LinkedIn.
Radius Global Infrastructure put out the same press release here last week and also released fourth quarter and full year 2022 financial results later that day:
NEW YORK--(BUSINESS WIRE)--Mar. 1, 2023-- Radius Global Infrastructure, Inc. (Nasdaq: RADI) (“Radius” or the “Company”), one of the largest international owners and acquirors of real property interests and contractual rights underlying essential digital infrastructure assets, today reported financial results for the quarter and year ended December 31, 2022.
Bill Berkman, Co-Chairman and CEO of Radius Global Infrastructure, commented:
“We are pleased to report record revenue of $135.5 million in 2022, up 31% from 2021, with gross profit increasing to $128.5 million, up 27% over the prior year. In 2022, our outstanding team of originators helped us to acquire communication sites through cash investments in real property interest and related intangible assets of $520.7 million, resulting in Acquisition Capex1 of $531.1 million that generated $37.5 million of annual rent. This acquisition of annual rent produced a yield of 6.4% on a net growth spend basis, which includes origination selling, general and administrative expenses.
In the fourth quarter, we increased revenue by 28% year-over-year, which included net organic growth of 4.7% from the existing portfolio on a constant currency basis, driven by our contractual inflation-linked rent escalators of 5.1%. We also grew Annualized In-Place Rents by 34% to a record $157.6 million. These high quality, primarily triple net and inflation-protected cash flow streams underlying mission-critical communications sites, combined with approximately $330 million of liquidity currently available to deploy for making additional accretive acquisitions, provide us with an excellent platform to execute our digital infrastructure ground lease aggregation strategy in 2023 and beyond.”
QUARTERLY RESULTS
Revenue increased 28% to $37.0 million for the three months ended December 31, 2022, as compared to revenue of $29.0 million for the three months ended December 31, 2021. The increase was primarily attributable to the additional revenue streams from investments in real property interests made during the past year, partially offset by unfavorable foreign exchange rate effects as compared with the fourth quarter of 2021.
Gross Profit rose 24% to $34.6 million during the three months ended December 31, 2022, as compared to gross profit of $27.9 million in the corresponding prior year period, while the Company generated a gross profit (or ground cash flow) margin of approximately 94% during the three months ended December 31, 2022. Ground cash flow margin has been impacted by expenses associated with fee simple interests acquired, primarily for property taxes.
Annualized In-Place Rents (“AIPR”) increased to $157.6 million as of December 31, 2022, an increase of $39.7 million or 34% over AIPR of $117.9 million as of December 31, 2021. On a constant currency basis, AIPR would have increased 40% year-over-year to $165.3 million as of December 31, 30, 2022.
FULL-YEAR RESULTS
Revenue increased 31% to $135.5 million for the year ended December 31, 2022, as compared to revenue of $103.6 million for the year ended December 31, 2021.
Gross Profit rose 27% to $128.5 million in the year ended December 31, 2022, as compared to gross profit of $101.1 million in the prior year.
Investments in Real Property Interests and Related Intangible Assets, as identified in the Company’s Consolidated Statements of Cash Flows, was $520.7 million and $469.7 million for the year ended December 31, 2022 and 2021, respectively. This represented an increase of $51.0 million, or 11%, for the year ended December 31, 2022 over the prior year.
Acquisition Capex was $531.1 million and $474.0 million for the year ended December 31, 2022 and 2021, respectively, or an increase of $57.1 million, or 12%, for the year ended December 31, 2022 over the prior year.
Please refer to the GAAP financial disclosures and reconciliations to non-GAAP financial measurement set forth below and in the Company’s Form 10-K for the year ended December 31, 2022 The Company pays for its acquisitions of real property (and other) interests either with a one-time payment at the time of acquisition or, under certain circumstances, with a combination of upfront payments and future contractually committed payments over a period of time, in each case pursuant to the individual acquisition agreement. In the Condensed Consolidated Statements of Cash Flows, the one-time and upfront cash payments are reported as Investments in Real Property Interests and Related Intangible Assets. The total cash spent and the commitment for future payments in any given period for the acquisition of real property (and other) interests, adjusted for changes in foreign currency, is our Acquisition Capex. Acquisition Capex is a non-GAAP metric, albeit one the Company believes is valuable to readers of the Company’s financial statements in assessing the Company’s financial performance and growth. Please refer to the table below for a full reconciliation of Investments in Real Property Interests and Related Intangible Assets to Acquisition Capex.
LIQUIDITY
As of December 31, 2022, Radius had $353.5 million of total cash and cash equivalents, restricted cash, and short-term investments. Of this amount, approximately $330 million was available to deploy for asset acquisitions. Radius also had $1.3 billion of available uncommitted borrowing capacity under various debt facilities in addition to the ability to access the worldwide credit and capital markets, subject to market conditions, in order to issue additional debt or equity if needed or desired.
FINANCING TRANSACTIONS
The summary below presents significant financing activities that occurred in 2022.
- In January 2022, Radius borrowed €225 million ($257.5 million as of the funding date) of the €750 million available under a new financing facility that Radius entered into in December 2021. The initial borrowing accrues interest at a fixed annual rate of approximately 3.2%, which is payable quarterly and will mature in January 2030.
- In April 2022, Radius borrowed $165 million under a new credit facility that matures in April 2027. Radius used the proceeds of this new facility to repay amounts outstanding under an existing credit facility that was scheduled to mature in October 2023. The initial borrowing accrues interest at a fixed annual rate of approximately 3.64%, which will be payable monthly. This compares to a cash pay interest rate of 4.25% under the previous credit facility. Concurrent with the closing of the transaction, Radius received an ‘A’ rating from Fitch for the facility, which has a leverage cap of 9.75x eligible annual cash flow (defined as Annualized In-Place Rents less a servicing fee), as compared to 7.75x under the previous credit facility.
OUTLOOK FOR 2023
Based on the current pipeline of investment opportunities, management is targeting the deployment of at least $400 million of Acquisition Capex in 2023. As the Company has previously noted, there may be quarterly variability in the amount of capital deployed.
About the Company
Radius Global Infrastructure, Inc., through its various subsidiaries, is a multinational owner and acquiror of triple net rental streams and real properties leased to wireless operators, wired operators, wireless tower companies, and other digital infrastructure operators as part of their infrastructure required to deliver a wide range of services.
For further information see https://www.radiusglobal.com.
This is a great acquisition for PSP Investments and its world-class partner, EQT.
The acquisition wasn't exactly a surprise as Bloomberg reported that EQT was in the process of completing a take private deal on Radius, which leases cell sites to wireless tower companies and mobile network operators.
There is a reason I posted those financials, they're terrific and despite the looming global economic recession (it's coming), digital infrastructure assets remain a very hot area for investors like EQT and PSP looking for “strong cash flows, sticky customer base, geographically diverse portfolio and inflation protection.”
In fact, I could kick myself for not investing some of my own money in Radius Global Infrastructure (RADI) last October when shares hit a 52-week low of $8 ($7.97 to be precise):
Among the top institutional holders, Centerbridge Partners owns 11.3% of the shares.
It will soon be taken private and its management will continue to operate the company, which holds interests in the revenue streams of nearly 9,190 digital assets located on more than 7,020 different communications sites in 21 countries. About two thirds of that portfolio is in Europe with about 18 per cent in Canada and the United States and the remainder in Latin America.
That is excellent geographic diversification and as Bill Berkman, CEO of Radius, notes:
“Partnering in a private capital context with EQT and PSP, both of which have significant expertise in communications infrastructure, will enable Radius to accelerate origination activity and further invest in both geographic expansion and adjacent asset opportunities. I want to thank the incredible Radius team for their commitment and success in building the platform we have today. With EQT and PSP’s support, we will continue to be a strong and collaborative partner for our tenants as we continue to grow Radius as the premier global aggregator and owner of digital infrastructure-oriented real property assets.”
And as Patrick Charbonneau, Senior Managing Director and Global Head of Infrastructure Investments at PSP, notes:
“Radius is a strong fit with PSP’s portfolio and mandate given it has inflation-adjusted contracted income, little exposure to GDP, and substantial growth opportunities linked to demand for digital services. I want to thank EQT who brings valuable expertise to help this partnership reach its full potential and I look forward to working with the excellent management team at Radius to support their continued delivery of value-accretive products to their customers.”
Radius is a strong fit to PSP's portfolio and this is a significant acquisition (co-investment) for PSP with a great partner (EQT).
Radius's management will also hold a stake in the company upon completion on this deal, aligning interests with its two new owners.
And both PSP and EQT have ample liquidity to help Radius grow over the next five years, after which PSP can buy it outright if it chooses to do so (or they sell it a nice premium if the offer is right).
Again, this is the key part (for me) in Radius's financial results:
We also grew Annualized In-Place Rents by 34% to a record $157.6 million. These high quality, primarily triple net and inflation-protected cash flow streams underlying mission-critical communications sites, combined with approximately $330 million of liquidity currently available to deploy for making additional accretive acquisitions, provide us with an excellent platform to execute our digital infrastructure ground lease aggregation strategy in 2023 and beyond.”
***
Annualized In-Place Rents (“AIPR”) increased to $157.6 million as of December 31, 2022, an increase of $39.7 million or 34% over AIPR of $117.9 million as of December 31, 2021. On a constant currency basis, AIPR would have increased 40% year-over-year to $165.3 million as of December 31, 30, 2022.
That's pure cash flow, an important metric for all digital infrastructure assets.
Below, Jennifer Fritzsche of Digital Infrastructure Investor discusses investing with William Berkman, CEO of Radius Global Infrastructure. Listen to what he said a year ago about their rent stream: "These are triple net rents which means we have 99% margin, so if we never acquired another company, that's basically what we would yield." He also discusses how operators like his father got into this business and discusses his background which is very interesting. Great interview.
Also, Radius Global Infrastructure is a wireless network rental contract management company that operates in the telecommunications sector. Its main line of business is the purchase of wireless network towers, offering immediate liquidity to his owners, in exchange for receiving in the future the rent contract operators associated with the network towers that have just been acquired. Learn about the company in 48 seconds in Spanish!
Also, Austin & Chris of Unhedged analyze the business model and investment prospects of Radius Global Infrastructure (RADI).
Listen carefully to how they describe Radius's business and how they need scale to bring down the cost of capital and why top value investors are attracted to the company. This is an excellent analysis.
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