SBA Communications continued to expand its tower empire, announcing today plans to acquire privately-held TowerCo for $1.45 billion. That price includes $1.2 billion in cash and 4.6 million Class A shares valued at $250 million.
TowerCo owns 3,252 sites across 47 states and Puerto Rico, and will be added to SBA’s more than 12,000 owned and 5,000 managed sites.
SBA said it expects to pay the cash portion of the deal using cash on hand, existing credit facilities and up to $900 million in financing commitments from J.P. Morgan. The company added that it expects the deal to produce approximately $93 million to $95 million in cash flow for full year 2013.
J.P. Morgan acted as financial advisor and Greenberg Traurig L.L.P. acted as legal advisor to SBA. Wells Fargo Securities L.L.C. acted as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison L.L.P. acted as legal advisor to TowerCo.
SBA earlier this year paid $1.1 billion for select assets of Mobilitie, including more than 2,300 tower sites in the United States and Central America and certain indoor and outdoor distributed antenna systems in Chicago, Las Vegas, New York City and Auburn, Ala. Mobilitie has a stake in Sprint Nextel’s Network Vision initiative.
In a conference call, SBA noted that TowerCo’s sites currently have an average of 1.8 tenants, with the ability to add up to two additional tenants per site. Sprint Nextel is seen as the largest tenant on TowerCo sites, followed by AT&T Mobility.
“We believe the TowerCo assets are high quality, well located and have ample capacity for additional tenants,” said SBA President and CEO Jeffrey Stoops, in a statement. “The towers are in excellent shape from a legal, systems and operational perspective, and will be readily integrated into our existing portfolio. As was the case with our Mobilitie acquisition earlier this year, we expect these towers will be in great demand for the future cell-splitting needs of U.S. wireless carriers, which needs we anticipate will flow from the continued growth in consumer demand for wireless data services.”
Analysts noted one concern for TowerCo’s tower assets, and a potential reason for its sale, was an overhang of sites reliant on Sprint Nextel’s iDEN network that the carrier has said it plans to shutter as early as next year. Sprint Nextel is also in the midst of a significant network upgrade plan through its Network Vision initiative that will see the carrier decommission approximately 20,000 cell sites and install updates to its approximately 37,000 remaining sites.
Analysts also explained that while the asking price was a bit higher than previous deals on a cash flow basis, it does move SBA closer to its goal of becoming a REIT.
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