Communications Sales & Leasing has made another M&A move, returning to the source for a few more assets eleven months after the original spinoff. This morning they announced a deal with none other than Windstream for tower assets and rights that will give that side of their infrastructure business a significant boost.
From Windstream CS&L be acquiring 32 more towers, the operating rights to 49 towers they already had, and also the rights to construct and operate towers on 1,000 or so properties they own and lease back to Windstream. The wireless carriers currently leasing access to the towers in question will become customers of CS&L.
The 32 additional towers are the main physical asset there of course, but more significant I think is the expanding operating role the company is playing. The pending purchase of PEG Bandwidth is already giving the company a significant operating business on the fiber side, while today’s move positions them to do the same on the tower side. The combination of the two assets places CS&L’s ambitions squarely within the wireless infrastructure space. While 81 is a relatively small foothold, the rights to build more of it on 1,000 properties suggests they might be looking at small cells to further those ambitions.
The deal cost CS&L $3M in cash and is expected to close in April.
If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!
Categories: Mergers and Acquisitions · Towers · Wireless
Join Our LinkedIn Group
Well, if you can’t kiss your cousin, who can you kiss!
Why wouldn’t these assets have been included in the original transaction?
Where are the 1000 additional sites and how were “the rights” not x-ferred in the original transaction, especially if these 1000 sites are real property?
PURE ALCHEMY
Let’s review a few things first. When this blockbuster of an idea first started trading CSAL closed on April 20, 2015 at 30.03 and WIN closed at 12.81. CSALs now trading at 22.63 (down 25%) and WIN is now & 7.79 (down 39%). The NASDAQ TELECOM INDEX is down 6.9% during same period.
I said it back in August 2014 when WIN first floated this cockamamie idea and I’ll say it again, this is pure financial alchemy.
http://www.telecomramblings.com/2014/07/windstream-spin-network-reit/#comment-19769
What is even more bizarre about today’s news is that both stocks are up today. There is no incremental value being created here. It is merely a sale/lease arrangement of assets where party A sells the assets to party B so that party B can charge party A to use those same assets.
Under this arrangement there is no reason whatsoever that share prices for both parties should go up on this news. Yet, miraculously, they did.
As I said elsewhere in the comment section when this idea was first floated:
“This deal is the equivalent of your mortgage company offering to buy your home and then rent it back to you at 2.5x your current mortgage payment.
Strip away all the complex capital structure gobbledy-gook and this transaction results in an annual net cash OUTflow increase of an astounding $400m/yr for WIN. Effectively, someone’s figured out a way to take $256m/yr in debt service and turn it into $650m/yr of “rent” by shuffling some papers through the SEC and the IRS.”
PURE ALCHEMY