SBA agrees US$1.45bn deal with TowerCo

US towerco SBA Communications has agreed to buy 3,252 tower sites from fellow US firm TowerCo for US$1.45bn.
SBA will pay US$1.2bn along with 4.6 million shares of SBA class A common stock that, based on SBA’s average three-day closing price of…

US towerco SBA Communications has agreed to buy 3,252 tower sites from fellow US firm TowerCo for US$1.45bn.

SBA will pay US$1.2bn along with 4.6 million shares of SBA class A common stock that, based on SBA’s average three-day closing price of US$54.48, equates to US$250m.

The cash consideration will be made up of cash on hand, existing credit facilities and up to US$900m in financing commitments from J.P. Morgan. The US$900m financing will be a two-year bridge facility at a rate of libor plus 3.5%, the company said in an analysts call.

“We have secured a two year bridge facility in connection with this transaction to give ourselves plenty of time to refinance, although we expect to be looking to refinance more quickly than that,” SBA CEO Jeffrey Stoops said in the conference call.

He explained that the pro forma net debt leverage will depend to some degree on the closing date, but it is expected to be in the 7.8x to 8.0x range at closure. Within a year, the company wants to reduce net debt leverage back to the target range of 7.0x to 7.5x. “We do not expect that we will be issuing any more equity to speed our deleveraging,” Stoops noted.

“We have a refinancing plan that encompasses multiple debt markets and provides us with the freedom to move opportunistically depending on conditions in any of the markets we may pursue.”

SBA expects the transaction to close in the last quarter of the year and projects the new towers to generate US$93m to US$95m in cashflow in 2013.

According to Stoops, SBA anticipates that at one point  “we are going to convert to a real estate investment trust [REIT], and all of these assets would qualify for REIT status”.

The acquisition of TowerCo is SBA’s second US$1bn-plus deal of the year, following its US$1.1bn acquisition of 2,300 towers from Mobilitie that it completed at the beginning of April. “We will not be pursuing any other major US transaction this year,” Stoop said today. Asked by analysts if deals outside US, specifically in Central America, remain possible, the CEO replied: “If it’s a wonderful opportunity that takes us into a new growth market, we don’t want to foreclose that option. Although it would have to be something pretty special”.

J.P. Morgan acted as financial advisor and Greenberg Traurig acted as legal advisor to SBA. Wells Fargo Securities acted as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison acted as legal advisor to TowerCo.