CityFibre has completed its £90m acquisition of national network infrastructure assets from KCom Group, taking it a step closer to becoming a viable alternative to BT’s Openreach.
UK fibre provider CityFibre (AIM:CFHL) has today completed its £90m (US$128m) acquisition of national network infrastructure assets from KCom Group (LSE:KCOM), having announced the agreement on 14 December. The deal excludes KCom’s core assets in Hull and East Yorkshire, in England’s north.
KCom will continue to serve existing customers on the acquired networks for up to 15 years, subject to a minimum revenue of £5m per year for the minimum five years.
Welcoming the deal, CityFibre CEO Greg Mesch said: “With a significant presence in 36 cities, 21 of which are completely new markets for us, we are now established as a credible alternative to BT Openreach, and the largest independent provider of wholesale fibre infrastructure on a national basis.”
The transaction was also significant, he added, because UK broadband infrastructure “has seen no meaningful alternative investment for well over a decade.
Financing
To finance the deal and develop its new assets, CityFibre raised £80m in a private placement managed by joint bookrunners FinnCap and Liberum. It also took out a £100m facility agreement from Sweden’s Proventus Capital Partners, which has a track record of lending to SMEs. In December, CityFibre indicated that it would draw £35m of the facility to pay for the KCom assets.
The facility agreement comprises a £35m acquisition facility, which will be available for 35 days; a two-year £35m term capex facility and a six-year £30m revolving credit facility (RCF).
The Proventus agreement includes a £65m accordion facility, which may be made available by any lender to refinance the RCF.
Subsidiary CF Limited is to pay 10% over Libor for the term facilities and 4.5% over Libor for the RCF, which can be adjusted down according to leverage level to a respective 8% and 4%.
To meet loan conditions, CityFibre on 11 December repaid the £4.5m it had borrowed from Citibank as part of a five-year term loan signed in February 2012.
On the financing, Mesch said: “The £180m funding package we have closed equips us to push hard on commercialising the acquired assets, which we have already begun to do with our first new service provider relationship on the acquired Bristol network, as announced on 14 January 2016. It also funds our continued organic growth trajectory towards our medium term goal of dense network presence in 50 towns and cities, with an estimated addressable footprint of 35,000 public sector sites, 10,000 mobile cell sites, 350,000 businesses, and 5 million homes.
CityFibre has a market cap of £155m, with a share price that has dropped 14% in the last twelve months.
