Historic agreement of Telefónica. The operator will sell all the towers that its Telxius division has, where it shares a shareholding with KKR and Pontegadea (Amancio Ortega), to the American giant American Tower Corporation for 7.7 billion of euros. The operation is configured in two separate and independent transactions: Europe and Latin America. The Spanish telecom will receive more than 4,000 million that will be destined to the reduction of financial debt.
The agreement establishes the sale of a total of 30,700 telecommunications tower sites and is fixed in two phases. The closing of the sale of the European and Latin American divisions will be independent and will have different regulatory authorizations. Payment will be made directly in cash. Telefónica owns 50.1% of Telxius shares. Pontegadea has almost 10% and the US fund KKR, 40%.
The pact contemplates an employment commitment, as explained by the operator in a relevant event sent to the National Securities Market Commission (CNMV). In addition, the buyer plans to invest 500 million dollars in building 3,300 new sites in Germany and Brazil until 2025. On the other hand, Telefónica will maintain the current leasing contracts for the towers signed with Telxius. The renewal conditions of these agreements do not include additional clauses.
This assessment demonstrates the high temperature of the telecommunications tower market today. According to the Spanish group, the implicit multiple would be 30.5 times the proforma adjusted Ebitda of Telxius. This has allowed it to generate a capital gain of 3,500 million euros. After the operation is completed Telefónica’s net financial debt will be reduced by approximately 4,600 million euros and the leverage ratio (Net Debt / EBITDA) of approximately 0.3 times.
For KKR and Amancio Ortega it will also be a particularly profitable operation. The founder of Inditex acquired 10% of the tower division for 378 million euros in 2018. Now he will receive more than double that. The US investment fund KKR bought 40% of the shares for 1,275 million in 2017. Today it will pocket, in the event of complete closure of the two transactions, 3,100.
“It is an operation that makes strategic sense within our roadmap; American Towers was our second supplier after Telxius”, Assures the president of the operator, José María Álvarez-Pallete. After this operation, American Tower became the first supplier of Telefónica both in Europe and in Latin America, and maintains its status as a partner in strategic projects in Brazil, Argentina and Colombia.
The choice of this American partner arrives after speculation about the possibility of a merger with Cellnex. Finally, this transaction has not occurred. The Spanish tower manager decided to take out the checkbook recently to keep all the towers of Hong Kong company Hutchison in Europe.
Cellnex has not been able to become a potential buyer or partner of Telefónica in this transaction, nor in that of Vodafone. The British operator ignored any offer and finally decided to create its own infrastructure division (Vantage Tower) which is expected to go public in the next few weeks.
Who is the buyer
American Tower It is one of the American giants that inspired companies like Telxius. The sale of telecommunications towers by the operators to independent managers has already occurred in the North American market before. Today the buyer of the Telefónica sites, founded in 1995, It is valued at almost 10 billion dollars in the stock market.
With a strong presence in the United States (41,000 towers) and Latin America, American Tower hardly had a presence in Europe. It had, according to its own figures, 2,200 sites in Germany and 2,800 in France and a testimonial package in Poland. In a statement, the company insists that it expects the assets it now buy to generate $ 775 million in revenue and an Ebitda of $ 390 million in its first full year in the portfolio. How will you pay for it? Mainly with debt.
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