American Tower and CoreSite Realty have entered into an agreement for the tower company to acquire CoreSite for $170 per share in cash, according to a statement from American Tower. Consideration for the transaction, including the assumption or repayment of CoreSite’s debt, is $10.1 billion.
“The transaction is expected to create a differentiated, comprehensive and interconnected communications real estate platform optimally positioned to benefit from the convergence of wireline and wireless networks amid accelerating global 5G deployments,” the statement reads.
CoreSite, which has 25 data centers, 21 cloud on-ramps and more than 32,000 interconnections in eight U.S. markets, generated $655 million in annualized revenue and $343 million in adjusted EBITDA in the third quarter this year, according to American Tower. It said that CoreSite has averaged double-digit annual revenue growth over the past five years and is led by a management team that has established a presence with cloud service providers, positioning the business for organic growth. American Tower said it expects to use its financial position to accelerate CoreSite’s development pipeline in the United States, while also evaluating the potential for international expansion in the data center business.
“The transaction is also expected to be transformative for American Tower’s mobile edge compute business in advance of the proliferation of 5G low-latency applications throughout the cloud, enterprise and network ecosystems, establishing a converged communications and computing infrastructure offering with distributed points of presence across multiple edge layers,” the statement reads. “With increased scale and a broadened, more comprehensive offering, American Tower and CoreSite expect the combined company to be well-positioned to address evolving customer needs through an enhanced value proposition for network and cloud providers, service integrators and enterprise customers.”
Analysts Eric Luebchow and Caleb Stein at Wells Fargo Securities said that they would not favorably view a CoreSite acquisition at an approximately 30 times multiple that is only marginally accretive and strategically questionable. “Our perspective is that American Tower would be better served by engaging in additional international tower mergers and acquisitions in Europe, Southeast Asia or Africa, where they have a more proven operational history,” they said.
By combining their capabilities, talent and resources, American Tower and CoreSite would be better equipped to deliver superior service and expanded solutions to customers, the tower company said. The transaction brings together the tower company’s wireless connectivity at the mobile edge and CoreSite’s interconnected data center facilities at the core edge to create an extended edge for customers that can support high-performance, low-latency applications, American Tower said. It said that with American Tower’s global footprint, the combined company would be positioned to support customer’s needs in additional markets.
“We are in the early stages of a cloud-based, connected and globally distributed digital transformation that will evolve over the next decade and beyond,” said Tom Bartlett, American Tower’s CEO. “We expect the combination of our leading global distributed real estate portfolio and CoreSite’s high-quality, interconnection-focused data center business to help position American Tower to lead in the 5G world. As the convergence of wireless and wireline networks accelerates and classes of communications infrastructure further align, we anticipate the emergence of attractive value creation opportunities within the digital infrastructure ecosystem.”
CoreSite’s CEO, Paul Szurek, referred to collaborating with American Tower to expand its communications infrastructure ecosystem and accelerate its edge computing strategy through the addition of CoreSite’s differentiated portfolio of U.S. metro data center campuses. He said that the combined company would be positioned to address the growing need for convergence among mobile network providers, cloud service providers and other digital platforms as 5G deployments emerge and evolve.
“We expect the enhanced scale and further geographic reach to provide a platform for the combined company to accelerate its growth trajectory and expand into additional U.S. metro areas, as well as internationally, leveraging American Tower’s extensive presence across the globe,” Szurek said.
Szurek said that CoreSite’s team, interconnection platform and data center campus portfolio are a complementary fit with American Tower’s communications sites. He said he believes the acquisition delivers value to CoreSite’s stockholders and would create a new chapter for CoreSite’s customers, employees and partners.
The transaction is anticipated to be modestly accretive to American Tower’s average funds from operations per share initially, and increasingly accretive over time, and is expected to close by the end of 2021, or shortly thereafter, American Tower said. It said that under the terms of the agreement, American Tower, through a wholly owned subsidiary, would commence a tender offer for all of the shares of common stock of CoreSite, which will be followed by a merger to acquire any untendered shares for the same price payable in the tender offer. The tender offer is subject to the tender of at least a majority of the outstanding shares of common stock of CoreSite and certain other customary conditions, the company said. American Tower said that CoreSite plans to declare and pay its fourth-quarter dividend during the fourth quarter of 2021 and no later than the close of the transaction.
“American Tower intends to finance the transaction in a manner consistent with maintaining its investment-grade credit rating and has obtained committed financing from J.P. Morgan,” the tower company’s statement reads.