CS&L, the network REIT spun off by US telco Windstream in April 2015, has announced its first acquisition: tower backhaul and dark fibre provider PEG Bandwidth, which it has agreed to buy from investment firm Associated Partners.
CS&L (NASDAQ:CSAL), the network REIT spun off by US telco Windstream (NASDAQ:WIN) in April 2015, has agreed to acquire tower backhaul and dark fibre provider PEG Bandwidth from investment firm Associated Partners.
The US$409m payment will include US$315m in cash, one million CS&L shares, and 87,500 shares in CS&L’s 3% Series A Convertible Preferred Stock. The buyer indicated that it would cover the cash portion through cash on hand and borrowings under its revolving credit facility.
Citigroup and Stephens Inc provided financial advice to CS&L, while Davis Polk & Wardell acted as legal adviser.
The REIT’s first acquisition, PEG has a 300,000 strand mile fibre network in the Northeast, mid-Atlantic, Illinois and South Central regions.
Describing it as “a strategic acquisition”, CS&L president and CEO Kenny Gunderman said PEG boasted a “rich fibre-to-the-tower network, respected management team, and strong customer relationships with over 80% of revenues from the largest wireless carriers”.
He explained: “PEG will provide us a high growth operating platform as we continue to build a fibre-rich REIT focused on acquiring and constructing mission critical communication infrastructure assets.
PEG managing director Scott Bruce, who is expected to join CS&L’s board, said: “CS&L is a great partner as PEG continues to grow and diversify its business, and we are thrilled to have a continuing equity interest in CS&L given our assessment of their future prospects.”
The parties expect the transaction, which is subject to regulatory approval, to close in April 2016.
CS&L targets M&A and financing opportunities
In an interview with TelecomFinance earlier in July, CS&L assistant treasurer Rob Clancy said that, beyond sale and leaseback deals with copper and fibre providers, the company planned to diversify by facilitating telecoms M&A by helping buyers finance acquisitions, provide a source of new capital investment for Windstream and others, house acquisitions within its taxable REIT subsidiary, and eventually incorporate other types of assets – such as coaxial cables, energy and data centres.
CS&L comprises 25% of Windstream’s total assets, most of which are copper and fibre assets, as Windstream CFO Bob Gunderman explained to TelecomFinance in June.
Windstream itself closed the US$575m sale of Windstream Hosted Solutions, its data centre business, to specialist TierPoint in late December.
