Altice USA today announced it has closed the sale of 49.99% of its Lightpath fiber enterprise business to Morgan Stanley Infrastructure Partners (MSIP). Indeed, Altice USA will retain the remaining 50.01% interest in Lightpath and, in turn, control of the company. Specifically, this transaction values Lightpath at an enterprise value of $3.2bn, which equates to 14.6x Lightpath’s EBITDA of $219m. Furthermore, based on Lightpath’s 8.8k owned fiber route miles, the transaction values Lightpath at $364k per fiber route mile.

This transaction supports Altice USA’s ongoing and new growth initiatives for Lightpath. Specifically, the partnership with Morgan Stanley enables Lightpath to expand through greenfield fiber builds or tuck-in acquisitions of other fiber platforms in Lightpath’s geographies. In turn, this transaction allows for Altice USA to reduce its growth capital expenditures towards the Lightpath business.

Lightpath Overview

Lightpath is a fiber broadband provider to businesses in the greater New York metropolitan area. As of Q3 2020, Lightpath’s fiber network comprised 11.7k connected buildings across more than 18.6k fiber route miles. Indeed these 18.6k fiber route miles include fiber route miles owned by Altice USA.

Lightpath sells services including Ethernet, data transport, IP-based virtual private networks, Internet access, telephony services, and VoIP services. Specifically, Lightpath’s bandwidth connectivity service offers speeds up to 100 gigabits per second. Additionally, Lightpath provides managed services to businesses. These managed services include hosted telephony services, managed Wi-Fi, managed desktop & server backup and managed collaboration services.

Proceeds from Lightpath Sale Used for Altice USA Share Repurchases

Altice USA will receive $2.4bn in gross proceeds from the sale of Lightpath to Morgan Stanley. Indeed, this translates into $1.1bn in net proceeds after Altice USA pays for cash taxes and makes certain debt repayments.

In turn, Altice USA is able to execute its previously announced Dutch auction tender offer to repurchase up to $2.5bn of its common stock at prices between $32.25 per share and $36.00 per share. Specifically, the tender offer will be active through December 21st.

Should Altice USA’s tender offer be fully subscribed, the company will repurchase 19.6% to 21.9% of its Class A common stock and 12.8% to 14.3% of its total outstanding shares. Indeed, with this tender offer, Altice USA is increasing its buyback target for 2020 from ~$2.0bn to ~$5.0bn. Furthermore, during Q4 2020, Altice USA has already repurchased 22.7 million Class A shares at an average cost of $29.10 per share, equating to ~$660m. Overall, Altice USA has repurchased ~$2.5bn of its Class A shares year-to-date in 2020.

Additionally, Altice USA’s Board of Directors increased the company’s capacity for existing share repurchases from $5.0bn to $7.0bn of Class A shares, to facilitate the tender offer.

Altice USA – Net Leverage Targets

As a result of the tender offer, Altice USA now expects its 2020 year-end net leverage for its subsidiary CSC Holdings to be between 5.0x to 5.5x Adjusted EBITDA. Indeed, the company expects to return to its net leverage target for CSC Holdings of 4.5x to 5.0x over time.

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