Cellnex’s acquisition of CK Hutchinson’s European towers for 10bn

M&A Hub
4 min readFeb 3, 2021

By Aron Adamski, BSc Economics @LSE

©FT

DEAL OVERVIEW:

  • Announcement date: 12/11/2020
  • Industry: Telecommunication
  • Implied EV/Year 1 EBITDA: 15.6x
  • Deal consideration: Cash-and-stock mix
  • Acquirer advisors: PwC, AZ Capital, HSBC
  • Target advisors: Moelis & Company, Deutsche Bank, Morgan Stanley

Cellnex Telecom, an acquisitive Spanish telecoms infrastructure company, agreed to acquire large portfolio of mobile towers in Europe from CK Hutchison for aggregate consideration of €10 billion. The sale comprises 29,100 sites across UK, Denmark, Ireland, Austria, Sweden and Italy.

Under the terms of the deal, Cellnex will pay a portion of the consideration in cash and the rest in shares. Cellnex will finance the cash payment using existing cash. CK Hutchison will use the proceeds from the transactions for general corporate purposes (including business expansion, upgrading business infrastructure and systems; and maintenance of appropriate working capital reserves), to reduce consolidated net financial indebtedness in order to optimise its capital structure and returns to shareholders.

COMPANY DETAILS: Cellnex Telecom S.A.

©Cellnex Telecom S.A.
  • Founded in: 2008
  • Headquartered in: Barcelona, Spain
  • Market Cap: €24.2bn
  • EV: €28bn
  • LTM EBITDA: €510.64mn
  • EV/ LTM EBITDA: 54.8x

Cellnex Telecom operates infrastructure for wireless telecommunication in Spain, Italy, the Netherlands, France, Switzerland, the United Kingdom, and Ireland. The company operates through two main segments: Telecom Infrastructure Services and Broadcasting Infrastructure. Among others, it offers co-location services in its infrastructure allowing mobile carriers to install their telecommunications and wireless radio broadcast equipment.The company serves mobile network operators, broadcasters, and other public and private companies.

As of 2019, it operated through a portfolio of 36,500 sites and 2,000 nodes (electronic devices that are attached to a network, and are capable of creating, receiving, or transmitting information over a communication channel).

COMPANY DETAILS: CK Hutchinson Holdings

©CK Hutchison Holdings
  • Founded in: 2015
  • Headquartered in: Hong Kong, China
  • Market Cap: €22.3bn
  • EV: €68.8bn
  • LTM EBITDA: €9.1bn
  • EV/ LTM EBITDA: 7.6x

CK Hutchison is among the largest companies listed on the main board of The Hong Kong Stock Exchange. CK Hutchison has five core businesses: ports and related services, retail, infrastructure, energy and telecommunications. Its holdings range from the world’s biggest port operators and retailers, to infrastructure companies. In the telecommunications sector it owns substantial holdings, including Three (a mobile brand); mobile telephone networks in Indonesia, Sri Lanka and Vietnam; and mobile and landline telephone networks in Italy.

STRATEGIC RATIONALE:

CONTINUED EXPANSION

The Spanish company has spent €7bn on other deals in 2020 having bought towers in Portugal, Poland and the UK, funded by debt and equity. In order to pursue the strategic expansion in Europe it raised €4bn via the issue of new shares.

The CK Hutchison portfolio strengthens Cellnex’s presence in three of its core markets, namely Italy, the UK and Ireland. Furthermore, Cellnex will enter three new markets, being Sweden, Austria, and Denmark. Therefore, the acquisition gives Cellnex a presence in 12 European markets. Overall, Cellnex will become a leading tower infrastructure provider in Europe, with a portfolio of 103,000 towers and will control around 20% of European wireless real estate.

“We are able, if you want, to anticipate the opportunity and capture the momentum in Europe. I cannot say that we did anticipate the size of the scale of this momentum, but we were there and ready to act.” ~ Tobias Martinez, CEO Cellnex Telecom

STRENGTHENED POSITION AS INCUMBENT

65% of CK Hutchison’s towers sites are within Cellnex’s existing geographies of Italy, the United Kingdom and Ireland. Therefore, Cellnex has the opportunity to reap considerable synergies from its combined tower footprint. For CK Hutchison the carve out opens up an opportunity to focus on its core telecoms operating business.

RISKS AND UNCERTAINTIES

Cellnex’s pitch for an acquisitive strategy is that it can make more profitable use of an individual tower it has acquired by adding radios from a larger number of carriers, while building new sites funded by contracts that lock in future cash flow. However, there is some scepticism among rival tower players over Cellnex’s ability to justify the price it has paid for its masts. Many don’t believe in Cellnex’s ability to generate enough additional tenancies to justify the price tag.

Moreover, the group is also facing more competition for Europe’s remaining tower assets. Vantage Towers, Vodafone’s tower company, has a €1bn war chest for acquisitions, while US private equity firm Blackstone has thrown its weight behind Phoenix Tower International, which bought tower assets in Ireland in 2020. Therefore, despite Cellnex’s early success in Europe, the competitors may soon begin to catch up.

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