American Tower on Wednesday announced two moves to fund its $9.4 billion acquisition of Telefónica’s Telxius tower divisions, including issuing shares and selling a minority stake in its European business to investment firm Caisse de dépôt et placement du Québec (CDPQ).
CDPQ is taking a 30% stake in ATC Europe for around $1.92 billion. American Tower is also issuing 8.5 million shares of common stock to raise around $2.1 billion.
Under the CDPQ deal, American Tower keeps management and operational control of its European business, along with day-to-day oversight. CDPQ is getting seats on ATC Europe’s Board of Directors as well as certain governance rights. The investment is expected to close in the third quarter of 2021.
The deal also helps tee up American Tower’s ability to grow its international reach down the line.
“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
Investment analysts from New Street Research believe the deal with CDPQ likely indicates that American Tower will be able to expand faster in Europe with M&A than it could on its own.
In a Wednesday note, New Street’s Spencer Kurn wrote that from a high-level “we believe the deal with CDPQ creates a framework for more aggressive inorganic expansion for AMT in Europe, and for AMT to be more competitive in bidding on future M&A.”
American Tower announced plans in January to buy Telefónica’s Telxius European and Latin American tower businesses. They consist of about 31,000 sites in Germany, Spain, Brazil, Chile, Peru and Argentina.
Unlike some of its domestic tower peers, American Tower has a global presence alongside approximately 43,000 U.S. sites. After the Telxius deal closes, the company will have roughly 220,000 communications sites.
Speaking on the company’s first quarter earnings call, Bartlett noted a target to build 40,000 to 50,000 new locations over the next five years based on continued increasing demand alongside mobile data growth, and he pointed help from private capital partners for future growth.
“We very much have our sights on increasing our footprint globally, and I think this is a great step,” Bartlett said, according to a transcript.
CDPQ’s EVP and Head of Infrastructure Emmanuel Jaclot said in a statement that the firm is thrilled to be active in establishing one of Europe’s biggest 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,” Jaclot stated.
Investment analysts had been waiting for details on the mix and financing details for the Telxius buy, which is expected to close in multiple phases in the second and third quarters.
Raymond James managing director Ric Prentiss wrote that firm thinks American Tower’s current European partner, Dutch asset manager PGGM, will stay on as a minority partner and that more minority partners could join later “but AMT would keep the majority stake and operational control.”
Wells Fargo analysts said that together the equity and private capital funding announced Wednesday make up 44% of the Telxius purchase price.
“The net ~$5.2B funding we expect will come in different flavors of debt funding, likely leveraging lower interest rates in markets outside the U.S.,” wrote the team led by Eric Luebchow.
The CDPQ deal puts ATC Europe’s enterprise value at around $10.55 billion. New Street Research noted that the European business is a combination of both the Telxius European sites and American Tower’s existing assets in Germany and France, the latter which generated $130 million of EBTIDA in 2020.