American Tower and CoreSite: $10.1bn Merger Process In-Depth

American Tower (NYSE: AMT) today commenced its tender offer to acquire all outstanding common shares of CoreSite Realty (NYSE: COR) in cash, at its previously announced offer price of $170.00 per share, which implies an enterprise value of $10.1bn for CoreSite. Below we summarize notable events and key takeaways regarding the background and process whereby American Tower acquires CoreSite Realty through a two-step merger, which includes a i) tender offer and ii) short-form back-end merger.

As part of financing its acquisition of CoreSite, American Tower has received a senior unsecured bridge facility with aggregate commitments of up to $10.5bn from J.P. Morgan, as arranger. Proceeds from this one-year interim financing, which was codenamed Chicago, will be used by American Tower at closing to pay all or a portion of the cash consideration under its merger agreement with CoreSite. As a first step towards closing, CoreSite shareholders have until December 27, 2021, to tender their shares in American Tower’s offer.

Immediately following completion of the tender offer, American Tower intends to complete a REIT merger, following which CoreSite Realty will become a wholly-owned subsidiary of American Tower. As a result, CoreSite’s shares will no longer be publicly-traded on the New York Stock Exchange.

Background of Offer and Merger – American Tower Acquires CoreSite Realty

As part of the merger process description below, American Tower and CoreSite Realty’s representatives include the following:

• American Tower: legal advisor was Cleary Gottlieb Steen & Hamilton
• CoreSite: financial advisor was Evercore. Also, CoreSite’s legal advisor was Wachtell, Lipton, Rosen & Katz

Additionally, Party A is described below as a publicly-traded “communication infrastructure company”, which press reports indicate may have been Digital Realty (NYSE: DLR). Dgtl Infra has supplemented these press reports with relevant Digital Realty disclosures.

Pre-Proposal Discussions

• March 5, 2021: Steve Baker, Vice President of Innovation & Business Development of American Tower sends an e-mail to Paul Szurek, President and Chief Executive Officer of CoreSite, seeking to engage on the possibility of deploying data centers on American Tower’s real estate. Subsequently, Paul Szurek connects Steve Baker with Steve Smith, Chief Revenue Officer of CoreSite
• June 24, 2021: a member of CoreSite’s Board introduces Paul Szurek via email to Tom Bartlett, President and Chief Executive Officer of American Tower
• Early July 2021: Evercore, CoreSite’s financial advisor, contacts two private equity firms to discuss market perceptions of CoreSite’s willingness to pursue a sale transaction
• Later July 2021: one private equity firm participates in a discussion with CoreSite regarding the possibility of collaborating. However, discussions center on joint venture and acquisition financing transactions
• July 30, 2021: Paul Szurek participates in a breakfast meeting with the Chief Executive Officer of another communication infrastructure company, known as Party A. During this meeting, the CEO of Party A raises whether CoreSite would discuss a strategic combination of Party A and CoreSite
• August 11, 2021: CoreSite’s Board, together with members of management, Evercore, and Wachtell Lipton, CoreSite’s legal advisor, convene a meeting to discuss Party A’s inquiry. Subsequently, Paul Szurek communicates to Party A’s Chief Executive Officer that CoreSite’s Board would evaluate any proposal for a transaction
• August 12, 2021: Paul Szurek meets with Tom Bartlett and sets up a joint meeting with their respective management teams. The purpose of the meeting is to explore potential future strategic business partnerships between CoreSite and American Tower

Party A Initiates Bidding with Written Proposal

• August 16, 2021: Paul Szurek receives a written proposal from Party A to acquire CoreSite in an all-stock transaction, implying a ~$161.72 per share value
• August 17, 2021: Paul Szurek contacts Tom Bartlett to ascertain American Tower’s potential interest in a transaction. Through this conversation, Tom Bartlett indicates that American Tower could be interested in a transaction but wants to become better informed about CoreSite’s business and prospects in order to make a proposal
• August 24 and 31, 2021: Paul Szurek and Tom Bartlett further discuss a potential transaction between CoreSite and American Tower
• August 30, 2021: Party A submits an updated written proposal to acquire CoreSite in an all-stock transaction, at a greater exchange ratio than its prior proposal, which implies a ~$161.71 per share value
• September 1, 2021: Steve Vondran, Executive Vice President and President of U.S. Tower Division of American Tower, and Nate Brown, Vice President of Corporate Development of American Tower, participate in exploratory discussions with Evercore regarding a potential transaction with CoreSite
• Early September 2021: CoreSite enters into separate confidentiality agreements with American Tower and Party A
• September 11 and 12, 2021: Tom Bartlett and Paul Szurek discuss American Tower’s consideration of a potential transaction with CoreSite
• October and Early November 2021: CoreSite provides American Tower and Party A with access to a virtual data room and due diligence materials. Also, CoreSite hosts management presentations and diligence sessions for both American Tower and Party A. Finally, CoreSite responds to numerous diligence requests and questions of American Tower and Party A

Party A Defers Revised Proposal

• October 11, 2021: Party A’s Chief Executive Officer calls Paul Szurek and states that there has been volatility in the market price of Party A’s common stock. Accordingly, Party A was willing to submit a revised proposal to acquire CoreSite at a greater fixed exchange ratio of Party A common stock per share, which implies a ~$149.51 per share value

Despite the greater fixed exchange ratio offered, Party A’s revised proposal represented a 7.5% decline in per share value to CoreSite shareholders, as compared to Party A’s prior proposal on August 30, 2021. Given the all-stock transaction offered by Party A, its valuation of CoreSite was dependent on its own share price performance. As a reference point, Digital Realty’s share price declined ~14% from August 30, 2021, to October 11, 2021.

Due to this volatility (i.e., share price decline), CoreSite agreed that Party A would defer submitting a revised proposal until after the public announcement of its Q3 2021 financial results, which was scheduled to take place later in October.

As a reference point, Digital Realty’s Q3 2021 financial results were released on October 26, 2021. Moreover, aside from CyrusOne, all other major publicly-traded data center operators released their Q3 2021 financial results in November.

American Tower Merger Discussions Accelerate with CoreSite Realty

• October 13, 2021: Paul Szurek and Tom Bartlett discuss the business and prospects of American Tower and CoreSite and how a transaction could potentially be structured. During this meeting, Paul Szurek indicates that CoreSite’s Board has received a proposal from another party. Additionally, Paul Szurek states that CoreSite is interested in receiving an indication of American Tower’s valuation of CoreSite
• October 15 and 20, 2021: American Tower’s Board meets with Tom Bartlett, Steve Vondran, Rod Smith, Executive Vice President and Chief Financial Officer of American Tower, and Ed DiSanto, Executive Vice President, Chief Administrative Officer, and General Counsel of American Tower. Discussions focus on how a transaction with CoreSite would further American Tower’s data center-based strategy
• October 20, 2021: American Tower submits a non-binding written proposal to acquire CoreSite at a value in the area of $165.00 per share
• October 23, 2021: CoreSite’s Board convenes a meeting with its management, Evercore, and Wachtell Lipton. Evercore discusses American Tower’s proposal and the revised proposal that Party A’s Chief Executive Officer indicated that Party A would be willing to make, which now implies a ~$165.51 per share value – a 10.7% increase since October 11, 2021 (in-line with a comparable rise in Digital Realty’s stock price)

CoreSite Sets Best and Final Proposal Deadline

• October 27, 2021: Evercore sends process letters to American Tower and Party A along with a draft merger agreement prepared by Wachtell Lipton. The process letters request that American Tower and Party A submit their best and final proposals by November 11, 2021
• November 3, 2021: Party A’s outside counsel delivers a mark-up of the merger agreement to Wachtell Lipton. Through this document, Party A contemplates a stock and cash transaction through a voted merger
• November 4, 2021: Tom Bartlett and Paul Szurek discuss the CoreSite Board’s feedback on American Tower’s proposal. Additionally, Cleary Gottlieb, American Tower’s counsel, submits a mark-up of the merger agreement to Wachtell Lipton
• November 8, 2021: Wachtell Lipton provides feedback to Cleary Gottlieb and Party A’s outside counsel on their respective mark-ups of the merger agreement
• November 9, 2021: financial media reports speculation regarding CoreSite exploring a strategic transaction with American Tower, Digital Realty, and private equity firms. Subsequently, CoreSite receives an inquiry from an executive of a communications infrastructure company with a smaller market capitalization than CoreSite’s. However, the party did not provide any details regarding the possible financial, legal, or other terms of a transaction
• November 11, 2021: American Tower submits a revised and final proposal to acquire CoreSite at an all-cash purchase price of $170.00 per share. Also, American Tower includes a revised mark-up of the merger agreement. Separately, Party A’s final proposal contemplates consideration of i) shares of Party A common stock and ii) $16.50 in cash per share, which implies a ~$164.58 per share value, in-line with its prior valuation on October 23, 2021

CoreSite Selects American Tower as its Merger Partner

• November 12, 2021: Paul Szurek, Evercore notify Party A that CoreSite has decided to finalize a transaction with another party
• November 14, 2021: CoreSite’s Board unanimously approves the merger agreement. Further, the board recommends that stockholders of CoreSite accept the offer and tender their shares to American Tower. Subsequently, American Tower and CoreSite execute the merger agreement
• November 15, 2021: American Tower and CoreSite issue a joint press release announcing their entry into the merger agreement

Merger Process In-Depth – Read More

Want to read more from our “Merger Process In-Depth” series? Check-out our coverage on the merger processes for Blackstone’s $10bn deal for QTS Realty, DigitalBridge’s $854m take-private of Boingo Wireless, Cyxtera’s $3.4bn combination with Starboard Value, and DigitalBridge’s $1.1bn pursuit of Landmark Infrastructure.