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CityFibre Approached by US Consortium

PE Fund acquire buy sell deal

CityFibre has agreed a £538 million ($750 million) takeover by a Goldman Sachs-backed consortium yesterday, saying it will be easier to fund its plan to build full-fiber networks serving 20 percent of the UK market under private ownership.

The consortium, jointly owned by Goldman Sachs’ West Street Infrastructure Partners and private equity firm Antin, will pay 81 pence a share, a 93 percent premium to Monday’s closing price of 42 pence, CityFibre said.

CityFibre’s chairman Chris Stone said the Goldman Sachs deal would provide long-term funding.

“Under private ownership, CityFibre will be able to gain alternative and potentially easier access to the financing required for its announced FTTH (fiber-to-the-home) deployment,” he said.

CityFibre, which listed in 2014, is building its own fiber-optic broadband network in Britain, taking on national provider BT in selected towns and cities.

It signed a partnership last year with Vodafone that will see the mobile company market its ultra fast broadband networks in around 12 British towns and cities, starting with Milton Keynes, Aberdeen and Peterborough.

The buyers both said they wanted to support CityFibre’s vision to extend fiber-based broadband networks across Britain.

CityFibre’s shares jumped 89 percent to 79.2 pence a share after the offer, which is backed by 68 percent of existing shareholders, was announced on Tuesday.

Analysts at Macquarie, who rate the company “outperform”, said CityFibre was at the vanguard of FTTH in Britain, but the project was in its infancy and the potential was significant.

“The offer price of 81 pence (…) is attractive reflecting the early stage of the business, but is well below our long-term target of 150p and significantly undervalues the business in the long term we believe,” they said.

CityFibre’s Chief Executive Greg Mesch said the company had raised 325 million pounds as a listed group, but it was now looking for long-term capital.

“We think it’s a perfect time to shift from public ownership and public scrutiny to private long-term patient capital while we go through this mass period of construction,” he said.

Its ambitions extend to 5 million premises, which based on average build costs of 500 pounds per premises, would require investment of up to 2.5 billion pounds.

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David Dungay

Editor - Comms Business Magazine