CS&L eyes future acquisitions with $250M equity program

CS&L's fiber assets, including those from its recent Tower Cloud acquisition. (CS&L investor presentation, June 2016)

Communications Sales & Leasing (CS&L) established a $250 million “at the market” equity offering program, signaling its intent to pursue future acquisitions to complement a growing network asset portfolio.

While CS&L does not have any near-term plans to sell company stock, the offering could give the company the flexibility it needs to pursue other deals, particularly of fiber infrastructure providers.

CS&L said in a release that it has “no immediate intention to utilize the program as it currently has substantial liquidity from existing cash on hand and undrawn borrowing capacity under its revolving credit agreement,” adding that the “program provides additional financial flexibility and an alternative mechanism to access the capital markets at an efficient cost as and when the Company needs financing, including for acquisitions.”

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Under the plan, CS&L could offer and sell shares of its common stock, par value 1 cent per share, with an aggregate gross sales amount of up to $250 million through equity distribution agreements with BofA Merrill Lynch, Goldman Sachs & Co., Morgan Stanley and Wells Fargo Securities.

CS&L has been quite active on the acquisition front, snapping up PEG Bandwidth and more recently Tower Cloud, which will be combined under a new division called Uniti Fiber. Additionally, the company acquired 32 wireless towers and operating rights for 40 towers from Windstream.

It is likely CS&L will pursue deals with network infrastructure companies that have similar fiber-based network assets to deepen its presence in the lucrative fiber to the tower (FTTT) segment.

While it has not indicated any potential acquisition targets, one provider that CS&L may chase could be FiberLight. The competitive carrier aggressively expanded its network in Texas by establishing an additional low-latency route between the western portions of the company's Texas network to tie its 10,000 mile network together. This and earlier expansions have enabled FiberLight to win contracts with a number of carrier customers -- particularly wireless operators -- and business customers.

Already, CS&L’s efforts seem to be paying off. During the second quarter, CS&L reported new contractual revenue of nearly $40 million due wholesale service wins with three large national carriers and one state's transportation department.

For more:
- see the release

Related articles:
CS&L to rebrand fiber division as Uniti Fiber, saw nearly $40M in Q2 fiber sales
CS&L's Tower Cloud purchase enhances exposure to Tier 1 wireless operators
Windstream spinoff CS&L makes first REIT strike, acquiring PEG Bandwidth for $409M
Windstream wraps spinoff of wireline assets into CS&L REIT

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