Brookfield Infrastructure Partners LP is buying telecommunications company Cincinnati Bell Inc .om Uhlman/Bloomberg News files
It was announced Monday that Brookfield Infrastructure and its institutional partners are buying Cincinnati Bell in a transaction valued at around US$2.6 billion, including debt.
Cincinnati Bell uses its fibre-optic and copper networks to provide high-speed internet, video, voice and data services to customers in parts of Ohio, Kentucky, Indiana and Hawaii.
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The company is currently upgrading its network to “next generation” fibre, a press release said, which is needed to support “the growing demand for data” and the emergence of fifth-generation cellular technology known as 5G. To date, half of Cincinnati Bell’s network has been “future-proofed,” the release said.
Acquiring Cincinnati Bell would fit into Brookfield Infrastructure’s existing interests. Chief executive Sam Pollock said in the release that the deal will add “utility-like cash flows,” as well as yet another major investment for the company’s data-infrastructure portfolio.
That portfolio has been particularly active lately, with the play for Cincinnati Bell following a couple of other deals.
Brookfield Infrastructure on Dec. 16 announced it was buying a telecom tower company in India for US$3.7 billion, with the company paying US$375 million of that and the rest coming from its investing partners.
And on Dec. 19, 3i Infrastructure PLC announced it had agreed to sell its 93-per-cent stake in the United Kingdom’s Wireless Infrastructure Group Ltd. to Brookfield Infrastructure, in a sale that valued the stake in WIG at around £387 million ($658 million). WIG builds and operates telecom towers in rural and suburban areas.
CIBC World Markets analyst Robert Catellier said in a note on the Indian telecom tower investment that Brookfield Infrastructure also had experience in the telecom infrastructure business in France and New Zealand.
“It is on strategy in regard to both jurisdiction and asset class, as BIP has been targeting additional data infrastructure investments,” he said. “Data infrastructure and transmission is expected to grow with the roll out of 5G service; the technology requires a significantly higher number of points-of-presence over 4G.”
Brookfield Infrastructure’s data infrastructure segment serves customers in the telecom and media broadcasting sectors, and its aims “are to invest capital to enhance and expand our service offerings while providing safe, reliable and secure access to our properties,” the company said in a third-quarter report.
“If we are able to achieve these objectives,” Brookfield added, “we will be able to attract new customers and maintain low levels of churn on existing customers.”
Approximately 30 per cent of Brookfield Infrastructure is owned by Toronto-based Brookfield Asset Management Inc., which has more than $500 billion in assets under management. Brookfield Infrastructure first went public in 2008, and calls itself “the flagship listed infrastructure company of Brookfield Asset Management.”
Shares of Brookfield Infrastructure rose Monday morning following the Cincinnati Bell announcement, and were up around 1.8 per cent as of 10:30 a.m., trading at $64.82 in Toronto.
Under the terms of the deal announced Monday, each issued and outstanding share of Cincinnati Bell common stock will be converted into the right to receive US$10.50 in cash upon the transaction closing, which is expected to happen by the end of 2020, pending shareholder and regulatory approval.
The US$10.50 cash offer is a 36-per-cent premium to Cincinnati Bell’s closing share price on Dec. 20.
“After thoroughly reviewing a range of strategic alternatives and possible business opportunities for maximizing value, the Board determined this transaction was in the best interest of the company, its shareholders, and its customers,” Cincinnati Bell chair Lynn Wentworth said in the release.
Chief executive Leigh Fox added that “the transaction strengthens our financial position, enabling accelerated investment in our strategic products that is not presently available to Cincinnati Bell as a standalone company.”
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