Written by Mary Lennighan
Virgin Media O2 has revealed that it will sell one-sixth of its Cornerstone UK towers business to investment firm GLIL Infrastructure for £360 million.
The announcement comes just days after the circulation of rumours to that effect and hours ahead of the publication of the telco’s third quarter results, which show growth in its fixed customer base and fibre footprint, as well as decent financials.
The Cornerstone deal has come in below some industry estimates, as we thought it might. GLIL will pay £360 million in cash for a 16.67% stake, which values the business as a whole at £2.16 billion. Back in April, when VMO2 kicked off the sale process, the Financial Times was working on a total value of around £3 billion, while Reuters at the weekend suggested £2.5 billion. It seems that while investor interest in towers has not waned too much, prices have.
Nonetheless, VMO2 points out that the deal represents a multiple of 18.7x on Cornerstone’s adjusted EBITDAaL for the year to March 2023, which is still an attractive figure, albeit smaller than the earnings multiples last year’s big European towers deals commanded; Deutsche Telekom’s sale of a 51% stake in its Germany and Austria towers unit represented an earnings multiple of 27x, for example.
Aside from the economic squeeze in the interim, the size of the stake sold plays its part here. There was talk earlier in the year that VMO2 might be willing to sell out of the towers business altogether, at the right price, but ultimately it seems keen to retain a significant presence in passive infrastructure.
The deal leaves VMO2 with 33.33% of Cornerstone, the other 50% being held by Vodafone’s Vantage Towers business. Technically, VMO2’s half of Cornerstone will be transferred to a holding company, in which GLIL will claim a 33.3% stake and the telco 66.7% on completion of the deal, which is expected in the coming weeks.
