Last week's rumors of a Telefonica move to sell a stake in Telxius to private equity have indeed come to fruition. This morning, the private equity firm KKR announced an agreement to acquire up to 40% of Telxius.
Telefonica created Telxius last year as a vehicle for infrastructure assets such as its submarine cables and its towers. Today Telxius operates a network spanning 65,000km of submarine cables of which 31,000 are owned, as well as 16,000 towers spread across five countries. They are currently working on new cables between the US and Europe as well as the US and Latin America, among other things.
KKR will be initially acquiring 62M shares with options to acquire another 38M. The deal implies Telxius has an enterprise value of €3.678B, of which €3.188B is equity, and an EBITDA multiple of 11.4. That puts the KKR's ultimate purchase price at €1.275B, give or take, fund which Telxius will likely use as part of its ongoing debt reduction efforts.
Telefonica will remain the anchor client for those assets, and of course will remain the majority owner as well. But what I'll be keeping an eye on is how much of an independent streak Telxius shows from here on out. Is this just about debt reduction for Telefonica, or might we see a more aggressive stance from on the Telxius side?