I was on the road yesterday travelling up I-95 from Florida to NJ, so of course that's when the long-awaited Crown Castle deal came down at last. And so it has happened, Lightower Fiber Networks has agreed to be acquired by Crown Castle International for $7.1B in cash.
Lightower's 33K or so route miles of fiber will join Crown Castle's other big fiber purchases - Sunesys, FPL Fibernet, Wilcon, 24/7 Fiber Network - in what is a growing national fiber footprint of some 60,000 route miles. The metro footprint now covers 23 of the 25 largest US markets, and will be a key piece of Crown Castle's growing small cell expansion.
The deal is expected to be immediately accretive to AFFO per share. After the close they expect to boost the annual common stock dividend rate by $0.15-0.20 per share and are increasing the long term annual dividend growth target from 7% to 8%. Crown Castle has commitments from Morgan Stanley and BofA Merrill Lynch to help finance the purchase.
Lightower is expected to contribute $850-870M in revenue during the first full year, with $510-530MM in adjusted EBITDA. For those counting, that multiple works out to a multiple of about 13.6 give or take.
We have gone a long way in the wireless backhaul business. At one point, wireless backhaul was a fools errand that the economics didn't support. Now we have a tower REIT spending a big multiple to acquire Lightower primarily for the potential it has in that area, with the announcement barely mentioning the enterprise and government verticals and not even saying "data center".
When Crown first bought 24/7 Fiber a few years back, I wasn't sure they meant it. They clearly do now though. Some speculation is rising that Zayo will be next. I don't see that as a near term thing, but I can't discount the possible eventuality. I do wonder if the other tower companies might finally sit up and take note of what Crown Castle is doing as well.