EUR 200.00 For Business Accounts Only

CELLNEX: ACQUISITION OF ARQUIVA (ANÁLISIS BANCO SABADELL)

The company has announced the acquisition of Arquiva’s Telecom unit for £ 2 Bn (€ 2.24 Bn, 19.7% market cap and ~39% of NFD). The deal will mean the integration of ~8,300 sites in the UK (18.4% of the total), of which 7,400 are owned by the company and the remaining 900 include marketing rights. The tenancy ratio for these sites would stand at ~1.4x (vs. ~1.57x CLNX). The towers are located mainly in rural areas (91%) and on the ground (80% vs. 20% on rooftops). Moreover, the agreement includes concessions to use street infrastructures for telecom sites in 14 London boroughs.
The adjusted EBITDA generated by these assets in 2020 would be £~170 M (~19% of the total), with £ 105 M of cash generation (~22% of the total). The deal’s multiple (adjusted for IFRS 16) would be around 16x (assuming EBITDA’20), compared to the company’s trading multiple of ~18x (and above that of the past few deals, which were closer to ~13.5x, although assuming a longer-term EBITDA run rate).
With this acquisition, CLNX will reinforce its positioning in the UK (we expect little synergies for the time being), which would still offer relevant opportunities for consolidation (CTIL and BT’s towers), and thus, from a business perspective, we welcome the move. The transaction is expected to be closed in the 2H’2, as it is subject to meeting certain conditions, standing out among which are: (i) approval from UK competition authorities; (ii) finalisation of carve-out and reorganisation of the business; (iii) release of the competition commitments target; (iv) obtaining the consent of Arquiva’s suppliers; (v) execution of a key agreement with a client under certain criteria.
In order to finance this deal, the company will use a £ 2 Bn syndicated loan and a guaranteed rights issue worth € 2.5 Bn (~22% of the market cap). ConnecT (29.9% of the capital), Canada Pension Plan Investment (4.95%) and Permian IP (0.94%), as well as the Board members and top executives (0.6% of the capital) would subscribe the rights issue (representing ~35.8% of the nee shares). The subscription Price will be € 28.85/sh. (19.6% discount vs. TERP and -23.8% vs. yesterday’s close), and thus, 86.7 M new shares will be issued (29% of the total).
After the acquisition and rights issue, the leverage ratio would fall to ~4.5x (from ~5.7x currently), and thus, the company would continue to have room to carry out medium-size deals although for large transactions it would need to resort to the market.
This deal would have an impact on the fundamental valuation of the current portfolio of around +4.5%.