Cellnex Telecom today announced it has reached an exclusivity agreement with Altice France and KKR (Starlight Holdco) to acquire their joint venture, called Hivory, which owns 10.5k towers in France, for €5.2bn. Additionally, the transaction includes a build-to-suit (BTS) program of up to 2.5k tower sites over the next eight years with an investment of €0.9bn. Indeed, the acquisition of Hivory increases Cellnex’s future contracted sales (i.e., backlog) by €13bn, up to €101bn. Finally, the deal will close in the second-half of 2021.

Anchor Tenant for Cellnex’s Towers – Hivory (Altice France)

Cellnex is acquiring the tower company Hivory, which manages 10.5k sites that primarily serve SFR, a French wireless carrier, whose parent company is Altice France. Specifically, Cellnex will sign a long-term Master Service Agreement (MSA) for an initial period of 18 years. Additionally, the Master Service Agreement (MSA) will be extendable for subsequent 5-year periods. Finally, Cellnex also has built-in rental escalators of 2% per year for Altice France, the anchor tenant.

Cellnex Hivory Towers France Altice KKR

Following completion of the Hivory transaction, Cellnex will be a key digital infrastructure provider to three of the four largest wireless carriers in France. Specifically, Cellnex will operate 26.7k tower sites, across France, with SFR (Altice France), Bouygues Telecom and Free (Iliad) as anchor tenants.

Transaction Rationale for Altice France and French Wireless Carriers

In France, Cellnex is fostering infrastructure sharing, freeing up financial resources for wireless carriers, enhancing the rationalization process of existing sites, and accelerating the deployment of new sites. In turn, Cellnex is ensuring both an efficient and seamless extension of 5G coverage in the country. Moreover, Cellnex is working with the French carriers to eliminate non-spot areas or zones without proper coverage in the country.

Transaction Valuation – Hivory Towers (Altice France, KKR)

Following completion of the transaction and planned build-to-suit, the deal will add €460m of EBITDA for Cellnex. Further, it will add Recurring Levered Free Cash Flow (RLFCF) of €250m, on a run-rate basis.

Recall, that the initial transaction consideration for Hivory’s towers paid by Cellnex to Altice France and KKR is €5.2bn. Additionally, after including the €0.9bn investment required for the Build-to-Suit (BTS) program of 2.5k new tower sites, the total Enterprise Value for the Hivory transaction equates to €6.1bn.

Key valuation metrics for the transaction are as follows:

  • Year 1 EBITDA of €320m, equates to a multiple of 16.3x EBITDA, on the initial €5.2bn enterprise value
  • Run-Rate EBITDA of €460m, which includes the BTS program, equates to a multiple of 13.3x EBITDA, on the total €6.1bn enterprise value
  • Recurring Leveraged Free Cash Flow of €250m, equates to a Free Cash Flow Yield of 4.1%
  • Enterprise Value per tower (excluding the Build-to-Suit program) equates to €495k per tower, on the initial 10.5k tower sites
  • Enterprise Value per tower (including the Build-to-Suit program) equates to €469k per tower, on the total 13.0k tower sites

Transaction Advisors – Cellnex

Cellnex was advised by legal advisor Herbert Smith Freehills, financial advisors AZ Capital, J.P. Morgan, and BNP Paribas, financial/tax due diligence advisor Price Waterhouse Coopers, and commercial advisor PMP Conseil.

Equity Capital to Fuel Cellnex’s Tower Growth

As part of funding the Hivory transaction, Cellnex plans to launch a fully underwritten rights issue of up to €7bn at the end of March 2021. Indeed, this rights issue will be used to finance growth from the recently announced Deutsche Telekom transaction in the Netherlands, today’s Hivory transaction, and the company’s growth pipeline for the next 18 months. The rights issue will be fully underwritten by J.P. Morgan, Barclays, BNP Paribas, and Goldman Sachs, acting as Joint Global Coordinators and Joint Bookrunners.

Cellnex Reloading on Equity Capital

In July 2020, Cellnex raised €4bn of capital, allowing it to pursue €11bn of new opportunities. However, Cellnex has already used this funding for two prior acquisitions made during the second half of 2020. Firstly, Cellnex partnered with Iliad in a €2.6bn deal, to acquire 7.0k towers from Play in Poland. Secondly, in November 2020, Cellnex agreed to acquire 24.6k towers across Europe from CK Hutchison for €10bn.

Therefore, the rights issue of up to €7bn, at the end of March 2021, is fresh capital. In turn, this allows Cellnex to finance a pipeline of projects that could reach €18bn in the next 18 months. Specifically, €7bn of this €18bn pipeline is already committed for the acquisition of Hivory in France and the Deutsche Telekom towers in the Netherlands.

Cellnex Telecom – Overview

Cellnex Telecom is Europe’s largest independent operator of wireless telecommunications and broadcasting infrastructure. Indeed, the company has a portfolio of 120k sites, pro forma for acquisitions and planned build-to-suit (BTS) programs.

Overall, Cellnex operates in Spain, Italy, the Netherlands, France, Switzerland, the UK, Ireland, Portugal, Austria, Denmark, and Sweden. The company has key institutional shareholders including Edizione, GIC, ADIA, Canada Pension Plan, CriteriaCaixa, Blackrock, and Wellington Management.

Adam Simmons is the Founder & CEO of Dgtl Infra. He started his career with an S&P 500-listed big box retailer, in an operations management role. Adam's entrepreneurial "itch" led him to start a 5G-driven company, focused on innovative retail solutions using augmented reality and shoppable videos, which was eventually sold to an advertising and consulting group. After, realizing the potential of 5G, Adam shifted his efforts towards investing in the "building blocks" of 5G - known as digital infrastructure, completing a number of strategic investments, buying cellular towers, data centers and fiber networks.

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