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CELLNEX: CONFIRMS ADVANCED TALKS WITH HUTCHISON (ANÁLISIS BANCO SABADELL)

CLNX has just confirmed it is in advanced talks with Hutchison to explore strategic collaboration scenarios, including the potential acquisition of some infrastructure assets and the execution of services contracts. For the time being, no binding agreement has been reached in this regard.
MARKET IMPACT
These talks are unsurprising, as the asset fits perfectly into CLNX’s strategy and press rumours had been already released in the last few months. The initial reading is positive on the strategic level, as this would mean a transformational deal for the company (Hutchinson has around 28,500 towers in Spain vs. around 73,000 in the case of CLNX).
As for the scope, given the size of the asset (with an investment, according to Hutchison’s announcement today, of between € 9-11 Bn, ~39% of CLNX’s market cap) and depending on the deal’s structure, CLNX would use up almost 100% of its current resources following the recent € 4 Bn rights issue and the latest tower acquisition in Poland. In order to gauge the specific impact of the possible deal, we would need to know details such as the final price, structure of the deal (and percent stake, which we understand would always be a majority), BTS commitments and the EBITDA associated with the towers. If control is taken (acquisition of more than 50% of the asset), the company’s leverage ratio would rise to between 6x-7x NFD/EBITDA (from the current 3x).
If the acquisition of 100% of the asset is confirmed (we insist it has not been confirmed by CLNX), and bearing in mind the EV/EBITDA multiple post IFRS16 from the latest tower purchase in Poland (11.9x) or 2020 average (11.4x vs. around CLNX’s 21x), the acquisition would mean increasing EBITDA by ~61% and the number of towers by at least +39%. In the absence of all the details, our current valuation for CLNX already includes acquisitions for up to € 13 Bn. As this deal would practically complete 100% of the financial resources, our valuation should include this acquisition and the additional upside would call for new purchases (and associated rights issues), which in any case is our central scenario for CLNX.