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CELLNEX: ACQUISITION OF SFR AND CAPITAL INCREASE (ANÁLISIS BANCO SABADELL)

 CLNX has announced the acquisition of SFR’s towers in France (purchasing 100% of Hivory Towers), initially 10,500 (11.6% of CLNX’s total) for € 5.2 Bn EV. CLNX’s total number of towers after the deal will reach 120,000. The contract will last 18 years (extendable in 5-year periods, with an “all or nothing” clause and with a fixed escalation of 2%). Additionally, the agreement includes a BTS programme for an additional 2,500 towers worth € 900 M (for an 8-year period). The portfolio’s tenancy ratio is 1.3x (below CLNX’s 1.43x as of 9M’20).
 The impact from this deal in year 1 (2022) will be € 340 M of sales, € 320 M of IFRS16 EBITDA (15.2% of CLNX’s total) and € 145 M of RLFCF (~13% of CLNX’s total). The 2029 figures (run-rate) will be: € 485 M of sales, € 460 M of IFRS16 EBITDA and € 150 M of RLFCF. The deal’s implied EV/EBITDA ratio (IFRS16 run-rate) is 13.26x, above the 11-6x from the latest acquisitions made in 2020 and below the company’s trading level of ~23x and that of its US peers (~25x). The EV/RLFCF ratio is 24.4x in 2029 and 35.8x in 2022, whereas the IFRS16 EV/EBITDA’22 ratio stands at 16.3x.
 The company expects the deal to be finalised in 2H’21.
 To finance the deal and other projects in the new pipeline, the company will carry out a € 7 Bn capital increase (28.9% market cap). It has detailed a new € 18 Bn pipeline (including this deal and the one in the Netherlands). With the capital increase CLNX will reduce NFD/EBITDA to 5.4x (from the previous ~6.8x), once again leaving leeway to make more deals. In fact, after discounting the deals in the Netherlands and France, the new pipeline would total € 11 Bn (to be carried out with the funds from the capital increase). The capital increase is subject to approval in the AGM (expected for late March), and thus it could be executed in early April.
MARKET IMPACT
 This is a new deal that strengthens the company’s presence in France (its weight on EBITDA will go from the current ~16% to ~27%), increasing its total towers in Europe by 11.6% to 120,000. As for the ratios paid, they are higher than in the past few acquisitions, which would be justified by the longer life of the contract, the 2% fixed escalation (vs. the usual inflation) and the low tenancy ratio, which would provide greater capacity for organic growth. With this acquisition the company once again stresses: (i) its capacity to make M&A moves and (ii) that there are still multiple options for growth in Europe (new pipeline of € 11 Bn after discounting the recent moves in France and the Netherlands).