Crown Castle International Corp. (NYSE:CCI) (“Crown Castle”)
announced today that it has entered into a definitive agreement to
acquire LTS Group Holdings LLC (“Lightower”) from Berkshire
Partners, Pamlico Capital and other investors for approximately
$7.1 billion in cash (subject to certain limited adjustments)
(“Transaction”), representing approximately 13.5x expected Adjusted
EBITDA contribution during Crown Castle’s first full year of
ownership. Lightower owns or has rights to approximately 32,000
route miles of fiber located primarily in top metro markets in the
Northeast, including Boston, New York and Philadelphia.
Following completion of the Transaction, Crown Castle will own or
have rights to approximately 60,000 route miles of fiber.
“We are excited about the addition of Lightower
given its attractive fiber footprint and the value we believe it
will create for our shareholders,” stated Jay Brown, Crown Castle’s
Chief Executive Officer. “Lightower’s dense fiber footprint
is well-located in top metro markets in the Northeast and is
well-positioned to facilitate small cell deployments by our
customers. Following the Transaction, we will have
approximately 60,000 route miles of fiber with a presence in all of
the top 10 and 23 of the top 25 metro markets. We expect the
Transaction to be immediately accretive to our AFFO per share and
long-term dividend growth and, as a result, anticipate increasing
our annual common stock dividend rate, subject to approval by our
board of directors, between $0.15 and $0.20 per share following the
closing of the Transaction.” Key Strategic and Financial
Benefits
- Expands deep, dense metro fiber footprint. The
Transaction will double Crown Castle’s fiber footprint, resulting
in Crown Castle owning or having rights to approximately 60,000
route miles of fiber, making it one of the largest owners of metro
fiber in the U.S. With a fiber footprint after the
Transaction that will cover 23 of the top 25 most populous U.S.
markets, Crown Castle is well-positioned to capitalize on the
growing demand for mobile connectivity as network architecture
continues to evolve and bandwidth demands continue to
increase.
- Provides scale for small cell deployments.
By combining Lightower’s dense metro fiber footprint with
Crown Castle’s industry-leading small cells platform, including
Crown Castle’s strong customer relationships and proven real estate
and network engineering capabilities, the Transaction is expected
to expand the small cell opportunities available to Crown Castle
and enhance its ability to meet the small cell deployment needs of
its wireless carrier customers while reducing the time and capital
required for such deployments.
- Immediately accretive to AFFO per share and common
stock dividend. Crown Castle expects the Transaction to be
immediately accretive to its Adjusted Funds from Operations
(“AFFO”) per share and increase its previous 6% to 7% long-term
annual dividend growth target to 7% to 8%. In the first full
year of Crown Castle’s ownership, Crown Castle expects Lightower
will contribute $850 million to $870 million in site rental
revenues, $510 million to $530 million in Adjusted EBITDA and $465
million to $485 million in AFFO before financing costs. On a
net income per share basis, the Transaction is expected to be
modestly dilutive during the first full year of ownership, due
primarily to the expected depreciation and amortization expense
associated with the Transaction. After the Transaction
closes, Crown Castle anticipates that it will increase its annual
common stock dividend rate, subject to approval by Crown Castle’s
board of directors, between $0.15 and $0.20 per share to reflect
the expected contribution from Lightower. Consistent with past
practice, in its third quarter 2017 earnings release, Crown Castle
expects to provide its Outlook for 2018 and make a related annual
common stock dividend announcement, which will be in addition to
the dividend increase announcement that Crown Castle expects to
make following the closing of the Lightower acquisition.
- Proven track record of execution and high-quality cash
flows. As a leading provider of fiber solutions,
Lightower has generated strong revenue growth with attractive
margins and returns on invested capital by focusing on
high-bandwidth, multi-location opportunities. Lightower has a
high-quality mix of customers consisting of large enterprises,
government agencies, healthcare providers, educational institutions
and carriers. With its recurring revenue model underpinned by
long-term contracts, Lightower’s customer contracts have a weighted
average remaining current term of approximately four years,
including approximately $2.7 billion of remaining contract
value. Additionally, Crown Castle expects that the vast
majority of Lightower’s assets and revenues will qualify as real
property and rents from real property, respectively, under the
Internal Revenue Service’s rules governing real estate investment
trusts (“REIT”).
Transaction Details
Crown Castle intends to finance the Transaction
consistent with maintaining its current investment grade credit
metrics, utilizing cash on hand and equity and debt financing,
including borrowings under its revolving credit facility.
Further, in connection with the Transaction, Crown Castle has
received financing commitments from Morgan Stanley Senior Funding,
Inc. and BofA Merrill Lynch totaling approximately $7.1 billion for
new unsecured bridge facility.
Morgan Stanley & Co. LLC acted as financial
advisor to Crown Castle, and Cravath, Swaine & Moore LLP
provided legal counsel to Crown Castle. Evercore and
Citigroup Inc. acted as the financial advisors to Lightower, while
Ropes and Gray LLP provided legal counsel to Lightower.
Crown Castle anticipates closing the Transaction
by the end of 2017. The Transaction is subject to federal and state
regulatory approvals, including expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act and review by the U.S. Federal Communications
Commission, and other customary closing conditions.
Conference Call Details
Crown Castle has scheduled a conference call for
Wednesday, July 19, 2017, at 7:30 a.m. eastern time to discuss the
Transaction and its second quarter 2017 earnings results. The
conference call may be accessed by dialing 800-967-7185 and asking
for the Crown Castle call (access code 7235918) at least 30 minutes
prior to the start time. The conference call may also be accessed
live over the Internet at http://investor.crowncastle.com. Any
supplemental materials for the call will be posted on the Crown
Castle website at http://investor.crowncastle.com.
A telephonic replay of the conference call will
be available from 10:30 a.m. eastern time on Wednesday, July 19,
2017, through 10:30 a.m. eastern time on Tuesday, October 17, 2017,
and may be accessed by dialing 888-203-1112 and using access code
7235918. An audio archive will also be available on the company’s
website at http://investor.crowncastle.com shortly after the call
and will be accessible for approximately 90 days.
ABOUT CROWN CASTLE
Crown Castle provides wireless carriers with the
infrastructure they need to keep people connected and businesses
running. With approximately 40,000 towers and 60,000 route miles of
fiber supporting small cells following the completion of the
Lightower acquisition, Crown Castle is the nation's largest
provider of shared wireless infrastructure with a significant
presence in the top 100 U.S. markets. For more information on Crown
Castle, please visit www.crowncastle.com.
Cautionary Language Regarding Forward-Looking
Statements
This press release contains forward-looking
statements that are based on Crown Castle management’s
expectations. Such statements include plans, projections and
estimates regarding (1) the Transaction, including timing and
financing thereof, (2) potential benefits of the Transaction,
including (a) improvement to or enhancement of Crown Castle’s asset
portfolio, growth, industry position and capabilities and (b)
contribution to or impact on Crown Castle’s financial or operating
results, including site rental revenues, net income (including on a
per share basis), Adjusted EBITDA, growth rates and AFFO (including
on a per share basis), (3) demand for wireless infrastructure,
including towers and fiber, (4) Crown Castle’s dividends, including
any increase thereof, (5) Crown Castle’s ability to generate
long-term value for its shareholders and meet the needs of its
customers and demand for data and connectivity, (6) Crown Castle’s
and Lightower’s respective fiber assets and footprint, including
the value thereof (7) the value and term of Lightower’s contracts,
(8) demand for mobile data and connectivity, and the growth
thereof, (9) demand for, potential growth of and opportunities
which may be derived from the Lightower assets, and (10)
qualification of Lightower’s assets and revenues under rules
governing REITs. Such forward-looking statements are subject to
certain risks, uncertainties and assumptions, including prevailing
market conditions and other factors. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those expected. More information about potential risk factors
that could affect Crown Castle and its results is included in Crown
Castle’s filings with the Securities and Exchange Commission. The
term “including,” and any variation thereof, means “including,
without limitation.”
Non-GAAP Financial Measures
This press release includes presentations of
Adjusted EBITDA, Adjusted Funds from Operations ("AFFO") and Funds
from Operations ("FFO"), which are non-GAAP financial
measures. These non-GAAP financial measures are not intended
as alternative measures of operating results or cash flow from
operations (as determined in accordance with Generally Accepted
Accounting Principles ("GAAP")).
Our measures of Adjusted EBITDA, AFFO and FFO
may not be comparable to similarly titled measures of other
companies, including other companies in the wireless infrastructure
sector or other REITs. Our definition of FFO is consistent
with guidelines from the National Association of Real Estate
Investment Trusts with the exception of the impact of income taxes
in periods prior to our REIT conversion.
Adjusted EBITDA, AFFO and FFO are presented as
additional information because management believes these measures
are useful indicators of the financial performance of our
business. Among other things, management believes that:
- Adjusted EBITDA is useful to investors or other interested
parties in evaluating our financial performance. Adjusted
EBITDA is the primary measure used by management (1) to evaluate
the economic productivity of our operations and (2) for purposes of
making decisions about allocating resources to, and assessing the
performance of, our operations. Management believes that
Adjusted EBITDA helps investors or other interested parties
meaningfully evaluate and compare the results of our operations (1)
from period to period and (2) to our competitors, by removing the
impact of our capital structure (primarily interest charges from
our outstanding debt) and asset base (primarily depreciation,
amortization and accretion) from our financial results.
Management also believes Adjusted EBITDA is frequently used by
investors or other interested parties in the evaluation of the
wireless infrastructure sector and other REITs to measure financial
performance without regard to items such as depreciation,
amortization and accretion which can vary depending upon accounting
methods and the book value of assets. In addition, Adjusted
EBITDA is similar to the measure of current financial performance
generally used in our debt covenant calculations. Adjusted
EBITDA should be considered only as a supplement to net income
computed in accordance with GAAP as a measure of our
performance.
- AFFO is useful to investors or other interested parties in
evaluating our financial performance. Management believes
that AFFO helps investors or other interested parties meaningfully
evaluate our financial performance as it includes (1) the impact of
our capital structure (primarily interest expense on our
outstanding debt and dividends on our preferred stock) and (2)
sustaining capital expenditures, and exclude the impact of our (a)
asset base (primarily depreciation, amortization and accretion) and
(b) certain non-cash items, including straight-lined revenues and
expenses related to fixed escalations and rent free periods.
GAAP requires rental revenues and expenses related to leases that
contain specified rental increases over the life of the lease to be
recognized evenly over the life of the lease. In accordance
with GAAP, if payment terms call for fixed escalations, or rent
free periods, the revenue or expense is recognized on a
straight-lined basis over the fixed, non-cancelable term of the
contract. Management notes that the Company uses AFFO only as
a performance measure. AFFO should be considered only as a
supplement to net income computed in accordance with GAAP as a
measure of our performance and should not be considered as an
alternative to cash flows from operations or as residual cash flow
available for discretionary investment.
- FFO is useful to investors or other interested parties in
evaluating our financial performance. Management believes
that FFO may be used by investors or other interested parties as a
basis to compare our financial performance with that of other
REITs. FFO helps investors or other interested parties
meaningfully evaluate financial performance by excluding the impact
of our asset base (primarily depreciation, amortization and
accretion). FFO is not a key performance indicator used by the
Company. FFO should be considered only as a supplement to net
income computed in accordance with GAAP as a measure of our
performance and should not be considered as an alternative to cash
flow from operations.
We define our non-GAAP financial measures as
follows:
Adjusted EBITDA. We define Adjusted EBITDA as
net income (loss) plus restructuring charges (credits), asset
write-down charges, acquisition and integration costs,
depreciation, amortization and accretion, amortization of prepaid
lease purchase price adjustments, interest expense and amortization
of deferred financing costs, gains (losses) on retirement of
long-term obligations, net gain (loss) on interest rate swaps,
gains (losses) on foreign currency swaps, impairment of
available-for-sale securities, interest income, other income
(expense), benefit (provision) for income taxes, cumulative effect
of a change in accounting principle, income (loss) from
discontinued operations and stock-based compensation expense.
Adjusted Funds from Operations. We define
Adjusted Funds from Operations as FFO before straight-lined
revenue, straight-lined expense, stock-based compensation expense,
non-cash portion of tax provision, non-real estate related
depreciation, amortization and accretion, amortization of non-cash
interest expense, other (income) expense, gain (loss) on retirement
of long-term obligations, net gain (loss) on interest rate swaps,
gains (losses) on foreign currency swaps, acquisition and
integration costs, and adjustments for noncontrolling interests,
and less capital improvement capital expenditures and corporate
capital expenditures.
Funds from Operations. We define Funds from
Operations as net income plus real estate related depreciation,
amortization and accretion and asset write-down charges, less
noncontrolling interest and cash paid for preferred stock
dividends, and is a measure of funds from operations attributable
to CCIC common stockholders.
Reconciliation of Expected Contribution from Lightower
Acquisition to Full Year 2018 for Adjusted EBITDA: |
|
|
|
Full Year 2018 |
(in
millions) |
Expected Contribution |
Net income (loss) |
$163 |
to |
$213 |
Adjustments to increase
(decrease) net income (loss): |
|
|
|
Asset
write-down charges |
$0 |
to |
$0 |
Acquisition and integration costs |
$20 |
to |
$40 |
Depreciation, amortization and accretion |
$250 |
to |
$300 |
Amortization of prepaid lease purchase price adjustments |
$0 |
to |
$0 |
Interest
expense and amortization of deferred financing costs(a) |
$0 |
to |
$0 |
Gains
(losses) on retirement of long-term obligations |
$0 |
to |
$0 |
Interest
income |
$0 |
to |
$0 |
Other
income (expense) |
$0 |
to |
$0 |
Benefit
(provision) for income taxes |
$15 |
to |
$20 |
Stock-based compensation expense |
$5 |
to |
$15 |
Adjusted EBITDA(b) |
$510 |
to |
$530 |
|
|
|
|
|
|
(a)
Excludes the impact of expected financing relating to the Lightower
acquisition. Assumes the Lightower acquisition closes on
December 31, 2017. |
(b)
See "Non-GAAP Financial Measures " herein for a discussion of our
definition of Adjusted EBITDA. |
Reconciliation of Expected Contribution from Lightower
Acquisition to Full Year 2018 for FFO and AFFO: |
|
|
|
Full Year 2018 |
(in millions) |
Expected Contribution |
Net income (loss) |
$163 |
to |
$213 |
Real estate related
depreciation, amortization and accretion |
$209 |
to |
$259 |
Asset write-down
charges |
$0 |
to |
$0 |
FFO(a) |
$396 |
to |
$446 |
|
|
|
|
FFO (from above) |
$396 |
to |
$446 |
Adjustments to increase
(decrease) FFO: |
|
|
|
Straight-lined revenue |
$(2) |
to |
$0 |
Straight-lined expense |
$0 |
to |
$0 |
Stock-based compensation expense |
$5 |
to |
$15 |
Non-cash
portion of tax provision |
$0 |
to |
$0 |
Non-real
estate related depreciation, amortization and accretion |
$16 |
to |
$66 |
Amortization of non-cash interest expense(b) |
$0 |
to |
$0 |
Other
(income) expense |
$0 |
to |
$0 |
Gains
(losses) on retirement of long-term obligations |
$0 |
to |
$0 |
Acquisition and integration costs |
$20 |
to |
$40 |
Capital
improvement capital expenditures |
$(29) |
to |
$(24) |
Corporate
capital expenditures |
$0 |
to |
$0 |
AFFO(a) |
$465 |
to |
$485 |
|
|
|
|
|
|
(a)
See "Non-GAAP Financial Measures " herein for a discussion for our
definitions of FFO and AFFO. |
(b)
Excludes the impact of expected financing relating to the Lightower
acquisition. Assumes the Lightower acquisition closes on
December 31, 2017. |
Contacts: |
|
Dan
Schlanger, CFO |
|
|
Son Nguyen,
VP & Treasurer |
|
|
Crown Castle
International Corp. |
|
|
713-570-3050 |
Crown Castle (NYSE:CCI)
Historical Stock Chart
From Apr 2024 to May 2024
Crown Castle (NYSE:CCI)
Historical Stock Chart
From May 2023 to May 2024