Communications Sales & Leasing (CS&L) is acquiring competitive fiber provider PEG Bandwidth for $409 million, marking its first publicly announced deal as a real estate investment trust (REIT) company.
The deal includes $315 million of cash, issuance of 1 million shares of the company's common stock, and the issuance of 87,500 shares of the Company's 3 percent Series A Convertible Preferred Stock. CS&L intends to fund the cash portion of the transaction through cash on hand and borrowing under its revolving credit facility.
PEG, which has established itself as a fiber network provider to wireless operators and enterprises, is currently owned by affiliates of Associated Partners.
Through a mix of its own internal investments and acquisitions of other regional providers like W.L. Gore & Associates' fiber assets, PEG has built a fiber network consisting of over 300,000 strand miles in the Northeast / Mid Atlantic and South Central regions of the U.S., as well as Illinois.
After meeting regulatory approvals and other customary terms and conditions, CS&L expects to close the acquisition by April 2016.
This deal is important for CS&L as it's the first one it has made and could provide benefits to both companies.
PEG itself currently has contracts with a number of the largest Tier 1 wireless operators for backhaul. At the same time, PEG has been extending its growing suite of fiber-based services, including its 100G service, to wholesale and business customers in Tier 2 and Tier 3 markets. By being acquired, PEG could potentially expand its existing customer base with larger financial backing, while CS&L gets a rich set of assets to serve Windstream and other clients it wants to attract.
CS&L is a creation of Windstream, which moved in July 2014 to spin off a number of its copper and fiber assets into a publicly traded REIT. It said this process would enable it to lower debt by nearly $3.2 billion while accelerating its broadband and IP-based network transitions.
- see the release
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