Colony Capital, through Digital Colony Partners II, and particularly, portfolio company Edgepoint Infrastructure is building up to a 51% stake in Indonesia’s publicly-traded tower company Centratama. Overall, Centratama manages 3.3k towers across Indonesia, which have a 1.6x tenancy ratio. Additionally, the company operates 850+ in-building distributed antenna system (DAS) sites with a 1.9x tenancy ratio.
Centratama Ownership – Digital Colony and Northstar
In February and March 2021, Digital Colony became an owner of Centratama by acquiring 43.8% of the company’s shares for $158m USD (2.3 trillion Indonesian Rupiah). Specifically, Digital Colony’s Southeast Asia-focused tower company Edgepoint Infrastructure, through the entity EP ID Holdings, holds the share capital of Centratama.
Additionally, Centratama’s other key shareholder, Northstar Group, a Singapore-headquartered private equity firm, also recently increased its holdings in Centratama to 48.0% from 41.8%. Specifically, Northstar Group is investing through the entity Clover Universal Enterprise.
Currently, the remaining 8.2% of Centratama shares are held by various public investors.
Pre-Emptive Rights Issue – Digital Colony Gains Control
In late-May and early-June 2021, Centratama will issue up to 12.7 billion new shares through a pre-emptive rights issue. The company is pricing this issue at 200 Indonesian Rupiah per share. Therefore, the rights issue could raise up to $175m USD (2.55 trillion Indonesian Rupiah) for Centratama.
Commitments from Digital Colony and Northstar Group
Northstar Group intends to take-up only a portion of its share of the rights issue (i.e., 916 million shares). In contrast, Digital Colony, through Edgepoint Infrastructure, will fully subscribe to the rights issue (i.e., 5.6 billion shares). In turn, Digital Colony will become the majority shareholder of Centratama, following the rights issue.
Shareholders that do not exercise their full pre-emptive rights (i.e., public shareholders and Northstar Group) will suffer dilution. Specifically, the rights issue will cause 29% dilution in the ownership of non-subscribing public shareholders of Centratama, following completion of the pre-emptive rights issue.
Pro Forma Shareholder Composition
Under all scenarios of the pre-emptive rights issue, Digital Colony will become Centratama’s controlling shareholder. However, the ultimate ownership interest of Digital Colony in Centratama will vary between 49.7% and 51.1%, depending on the number of public shareholders that subscribe to the rights issue.
Below are two scenarios, at each extreme, for Centratama’s shareholder composition, pro forma for the rights issue:
Scenario #1: Public Shareholders Do Not Subscribe to Any of the Pre-Emptive Rights Issue
- Digital Colony (Edgepoint Infrastructure): 51.1% ownership in Centratama
- Northstar Group: 42.1% ownership in Centratama
- Public Shareholders: 6.8% ownership in Centratama
Scenario #2: Public Shareholders Fully Subscribe to the Pre-Emptive Rights Issue
- Digital Colony (Edgepoint Infrastructure): 49.7% ownership in Centratama
- Northstar Group: 41.0% ownership in Centratama
- Public Shareholders: 9.4% ownership in Centratama
Use of Proceeds by Centratama
Centratama notes that the majority of the capital raised through the rights issue will be allocated towards tower construction and acquisition opportunities. Indeed, the company intends to expand its telecommunications tower portfolio further in Indonesia.
Digital Colony and Edgepoint Infrastructure – Growing in Indonesia
Following completion of the Centratama rights issue and the closing of its pending acquisition of 4.2k towers from Indosat Ooredoo, Digital Colony will be the controlling shareholder of entities owning 7.5k towers throughout Indonesia. Indeed, assuming a combination between Centratama and the Indosat Ooredoo towers, Edgepoint Infrastructure will become the fourth largest independent tower company in Indonesia.
However, Edgepoint Infrastructure will remain materially smaller than Indonesia’s largest tower companies. Specifically, these include Mitratel, Protelindo (Sarana Menara Nusantara), and Tower Bersama.