Lumen Technologies today announced that it has agreed to sell its Latin American business to Stonepeak Infrastructure, a private equity firm, for $2.7bn. Specifically, this business will become an independent, U.S.-headquartered portfolio company of Stonepeak, known as New LATAM Company. Notably, AustralianSuper, Australia’s largest pension fund, is investing alongside Stonepeak Infrastructure in the transaction.

For full-year 2020, Lumen’s Latin American business generated ~$300m of estimated adjusted EBITDA. In turn, this implies a valuation multiple of ~9x EBITDA for the Latin American business.

Finally, the transaction is expected to close in the first-half of 2022.

Digital Infrastructure – Lumen’s Latin American Business

Lumen Technologies’ Latin American digital infrastructure includes subsea cables, terrestrial fiber, and data centers across the region.

Subsea Cables

Lumen Technologies is an owner of Latin American subsea cables including:

  • Pan-American Crossing (PAC): 5.9k miles (9.5k kilometers) which connects the United States, Mexico, Panama, and Venezuela
  • South American Crossing (SAC): 9.9k miles (16.0k kilometers) which connects Panama, Colombia, Peru, Chile, Argentina, Brazil, and Venezuela

Additionally, Lumen has leased access and indefeasible right of use (IRU) segments on additional subsea cables which reach Latin America.

Fiber (Terrestrial)

Lumen Technologies has ~20k+ route miles (~30k+ route kilometers) of terrestrial fiber network footprint throughout Latin America.

Lumen Technologies Latin American Fiber Network
Click here for a larger version of this image.

During 2020, Lumen’s expansion of its Latin American fiber network included the following:

  • Mexico: tripled its fiber infrastructure to 2.2k route miles (3.6k route kilometers) of fiber
  • Brazil: added 280+ fiber route miles between the northeast of the country, São Paulo, Belo Horizonte, and Rio de Janeiro
  • Argentina: built 112 fiber route miles between the provinces of Mendoza and San Juan. Overall, Lumen has 3.1k route miles (5.0k route kilometers) of fiber in the country
  • Chile: increased network by 34 fiber route miles connecting 200 corporate buildings in Greater Santiago
  • Peru: overall, Lumen has 600+ route miles (1.0k+ route kilometers) of fiber in the country
  • Ecuador: added a 500-mile fiber optic route connecting to Colombia, and a 600-mile national fiber ring. Overall, Lumen has 900 route miles (1.5k route kilometers) of fiber in the country

Data Centers

Lumen Technologies operates 18+ data centers in Latin America’s top cities and business centers. Specifically, the company offers data center services in São Paulo, Rio de Janeiro, and Fortaleza, Brazil; Mexico City, Mexico; Santiago, Chile; Buenos Aires, Córdoba, and Mendoza, Argentina; Bogotá and Cali, Colombia; Lima, Peru; and Quito and Guayaquil, Ecuador.

Lumen Technologies Latin American Fiber Network Data Centers

Within these facilities, Lumen hosts both its own and third-party customer IT environments.

New LATAM Company – Stonepeak Infrastructure Strategy

Stonepeak Infrastructure intends to maintain Lumen’s current Latin American leadership team and organization. Overall, this team is led by Hector Alonso, Lumen’s President for the region.

Expansion

Stonepeak plans to invest significantly behind Alonso and the New LATAM Company management team. This includes expanding Lumen’s fiber network across the entire region. Indeed, this transaction provides the New LATAM Company with more autonomy, than it had as a division of Lumen, to serve its customers and invest in Latin America.

Transaction Rationale – Lumen Sells Latin American Business to Stonepeak

Lumen Technologies’ sale of its Latin American business to Stonepeak Infrastructure allows the company to maintain its global presence through a strategic relationship with the New LATAM Company. At the same time, the net proceeds received from the sale provides Lumen with additional capital to accelerate investments in its key growth areas. Finally, the company notes that it can use the transaction proceeds for debt reduction or share repurchases.

Strategic Relationship – New LATAM Company

Lumen will continue to serve customers in North America, EMEA (Europe, Middle East, and Africa) and APAC (Asia-Pacific) regions with needs in Latin America, through its strategic partnership with the New LATAM Company. Specifically, the relationship includes reciprocal reselling and network arrangements for each party’s fiber footprints, data centers, and other network assets.

Upon completion of the transaction, customers that need services within the Latin America region will work directly with the New LATAM Company. Also, these customers can go through the strategic Lumen partnership.

Transaction Advisors – Lumen Technologies

Lumen Technologies’ financial advisors were Bank of America, Morgan Stanley, Citi, and Goldman Sachs. Additionally, Lumen Technologies’ legal advisor was Jones Walker.

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