- Uniti Group (UWL) has entered will acquire Telstra’s (TLS) Telstra Velocity and South Brisbane Exchange assets for $140 million
- Velocity is Telstra’s optical fibre network that uses fibre-to-the-premises FTTP technology to deliver high-speed services across Australia
- The deal will add over $21 million in annual earnings, and will also be 13 per cent earnings per share (EPS) accretive
- Telstra will also become a retail service provider (RSP) of the Uniti FTTP business, which gives Uniti an edge to compete for business from greenfield property developers
- Uniti will fund the buy through a $50 million placement, a potential $10 million share purchase plan, as well as through debt and operating free cashflow
- Uniti remains in a trading halt and shares last traded at $1.48 on December 15
Uniti Group (UWL) has entered a binding agreement to acquire Telstra’s (TLS) Telstra Velocity and South Brisbane Exchange assets for $140 million.
Velocity is Telstra’s optical fibre network that uses fibre-to-the-premises FTTP technology to deliver high-speed broadband, phone, subscription TV and free-to-air services in Australia.
Uniti believes the acquisition will add considerable scale and reach to its Wholesale and Infrastructure FTTP network. It will do so by increasing active premises by around 40 per cent to over 170,000.
The acquisition will also add at least $21 million in annual earnings before interest, taxes, depreciation and amortisation (EBITDA), as well as a 13 per cent increase in earnings per share.
“This is another remarkable milestone for our young company. To have secured such a large FTTP network aligned to our core strategy which can be integrated quickly to grow our ‘core plus’ infrastructure earnings is a wonderful way to end what has been a completely transformative year for Uniti Group,” Managing Director and CEO Michael Simmons said.
Under the deal, Telstra will also become a retail service provider (RSP) of the Uniti FTTP business.
According to Uniti, having Australia’s largest retail telecommunications provider join its RSP community, gives it more leverage and a greater ability to compete for business from greenfield property developers.
“The agreement struck with Telstra for it to become an RSP of our W&I business is perhaps the most significant strategic aspect of this transaction, given the large universe of presently untapped greenfield property opportunities it will enable us to target with Australia’s largest RSP as part of our FTTP offering and associated range of value added services, such as access control, CCTV and perimeter WIFI services,” Michael said.
Transaction terms
The purchase consideration totals $140 million which includes $85 million payable once the transaction is completed, $20 million paid in three equal instalments over three years and $35 million which is to be paid when the assets have been transitioned.
To support the acquisition, Uniti is launching a fully underwritten institutional placement to raise $50 million.
33.3 million shares will be issued at $1.50 per share — representing a 1.4 per cent premium to the last closing price of $1.48 on December 15.
Additionally, Uniti is hoping to raise a further $10 million through a share purchase plan. Eligible shareholders will be able to buy up to $30,000 worth of shares from December 23.
Further, Uniti has received commitments from Commonwealth Bank and Westpac to provide another $50 million to partly fund the acquisition. Lastly, Uniti will access its operating free cashflow over time to fund the deferred payments.
Uniti remains in a trading halt and shares last traded at $1.48 on December 15.