Boingo Wireless (NASDAQ: WIFI), a distributed antenna system (DAS) and Wi-Fi provider that serves carriers, consumers, property owners, and advertisers, today announced that it has agreed to be acquired by Digital Colony Partners II (Digital Colony), the second flagship private equity fund from Colony Capital. Upon completion of the merger transaction, Boingo Wireless will become a private company, and will no longer be a public company that trades on the Nasdaq.
Digital Colony will acquire all the outstanding shares of Boingo Wireless common stock for $14.00 per share in cash. Indeed, this acquisition price represents a 23% premium to Boingo Wireless’ closing price of $11.40 on February 26, 2021.
Overall, this transaction values Boingo Wireless at $854m, including the assumption of $199m of Boingo Wireless’ net debt obligations. Additionally, the transaction implies a market value for Boingo Wireless’ equity of $655m. Finally, the transaction will close in the second quarter of 2021.
Transaction Overview – Boingo Wireless and Digital Colony
During 2020, Boingo Wireless generated revenue of $237m and adjusted EBITDA of $83.5m. Therefore, using full-year 2020 metrics, this transaction equates to a multiple of 3.6x revenue and 10.2x EBITDA, on the $854m enterprise value.
Debt financing for the transaction is being led by Truist Securities along with Joint Lead Arrangers and Joint Bookrunners TD Securities and CIT Bank.
TAP Advisors is serving as exclusive financial advisor to Boingo Wireless. Additionally, Gunderson Dettmer is serving as legal counsel to Boingo Wireless.
Credit Suisse is acting as lead financial advisor and Truist Securities is acting as co-financial advisor to Digital Colony. Additionally, Simpson Thacher is serving as legal advisor to Digital Colony.
Merger Termination Rights – Boingo Wireless and Digital Colony
The merger agreement between Boingo Wireless and Digital Colony contains customary termination rights for each party. Indeed, these rights provide the opportunity for another transaction to occur, before Boingo Wireless is acquired Digital Colony.
Go-Shop Period – Boingo Wireless Termination
Boingo Wireless will be required to pay Digital Colony a termination fee of $13.1m (2% of equity value) if the merger agreement is terminated by Boingo Wireless during the Go-Shop Period. For example, Boingo Wireless could terminate the agreement, in order to enter into another agreement for a superior proposal.
Notably, Boingo Wireless has a 25-business day Go-Shop Period from March 1, 2021 to April 2, 2021.
After Go-Shop Period – Boingo Wireless Termination
Boingo Wireless will be required to pay Digital Colony a termination fee of $19.6m (3% of equity value) if the merger agreement is terminated by Boingo Wireless after the Go-Shop Period. Again, Boingo Wireless could terminate the agreement, in order to enter into another agreement for a superior proposal.
Additionally, termination of the merger, and payment of $19.6m, would also occur if:
- Board of Directors of Boingo Wireless changes or withdraws its recommendation in favor of the merger
- Boingo Wireless willfully and materially breaches its obligations under the merger agreement regarding solicitation of alternative acquisition proposals
- Boingo Wireless terminates the merger after August 26, 2021, known as the Outside Date
Other Specified Circumstances – Digital Colony Termination
Digital Colony will be required to pay Boingo Wireless a termination fee of $32.7m (5% of equity value) if the merger agreement is terminated by Digital Colony due to failure to consummate the merger after the applicable closing conditions are met. For example, closing conditions include Digital Colony securing proceeds for debt financing a portion of the Boingo Wireless transaction.
Boingo Wireless and ExteNet Systems to Combine?
Digital Colony views Boingo Wireless as a leader in indoor wireless infrastructure. Indeed, the company operates networks that serve a large and growing addressable market. Moreover, Digital Colony is backing Boingo Wireless’ team to develop and deploy reliable networks serving customers including Verizon, AT&T, and T-Mobile.
Notably, Colony Capital already owns a very similar company, with a similar customer base to Boingo Wireless, which is ExteNet Systems. Specifically, Colony’s investment in ExteNet Systems sits within its Digital Bridge Holdings portfolio. Indeed, ExteNet is the portfolio company through which Colony Capital gets exposure to small cells and distributed antenna systems (DAS).
Overall, ExteNet owns 33.1k small cell & DAS nodes, 420 networks and 3.6k fiber route miles. Indeed, this is a very complementary portfolio to Boingo Wireless, which operates 74 DAS venues, comprised of 41.2k DAS nodes. Furthermore, Boingo Wireless has an additional 11.5k DAS nodes in backlog.
Therefore, following completion of the take-private of Boingo Wireless, Digital Colony could position itself to merge the two businesses into a scaled indoor wireless infrastructure provider. Specifically, Boingo Wireless will reside in Digital Colony Partners II, the second flagship private equity fund from Colony Capital. Therefore, Digital Bridge Holdings would need to sell ExteNet Systems to Digital Colony Partners II, a related party transaction, in order to effectuate any merger between the two companies. Only time will tell if this transaction is possible.
TAP Advisors Serve Boingo Wireless and New Investors in ExteNet
Through today’s announcement, it is now public that TAP Advisors is serving as exclusive financial advisor to Boingo Wireless. Indeed, this closely follows TAP Advisors acting as exclusive financial advisor, to a consortium led by John Hancock, on the acquisition of a 30% minority stake in ExteNet Systems in October 2020. Overall, this connection between Boingo Wireless, ExteNet Systems, Colony Capital, and TAP Advisors further piques investor speculation.
Colony Capital’s Digital Infrastructure Ecosystem Expanding
Finally, as shown through Colony Capital’s Q4 2020 earnings presentation below, Boingo Wireless is a company that Colony Capital has been tracking for some time. Indeed, Boingo Wireless is now being brought from the traditional siloed digital infrastructure approach to Colony Capital’s hyper-converged digital architecture.