DigitalBridge partners with Brookfield on GD Towers deal

October 2022 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

October 2022 Issue

In one of the largest infrastructure deals of the year, DigitalBridge Group, Inc. announced in July that funds affiliated with its investment management arm, together with Brookfield Infrastructure and its institutional partners, had reached an agreement to acquire a 51 percent ownership stake in GD Towers, the mobile telecommunications tower business of Deutsche Telekom AG. The deal values the business at $17.5bn, on a consolidated basis, including the assumption of net debt.

The deal is expected to close in late 2022, subject to regulatory approvals and other customary closing conditions.

GD Towers is Germany’s largest tower company, owning and operating over 33,000 towers and communication sites in Germany and over 7000 towers and communication sites in Austria. The unit is led by an independent management team with decades of European tower company experience and a track record of delivering consistent growth and stable cash flows. GD Towers’ portfolio is supported by an anchor tenancy agreement with Deutsche Telecom, which will retain a minority 49 percent ownership stake in the company following completion of the transaction.

The unit generated €1.1bn of pro forma revenues in 2021. Pro forma adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) after leases for 2021 amounted to €640m.

“Deutsche Telekom once again delivers on its strategic agenda,” said Tim Höttges, chief executive of Deutsche Telekom. “We crystalize the value of our tower assets, thereby creating value for our shareholders. At the same time the deal allows us to continue improving Deutsche Telekom’s undisputed network leadership in Germany and benefit from further value upside of the towers business through our retained 49 percent stake.”

“The partnership being formed today is about building the next generation digital infrastructure champion of Europe,” said Marc Ganzi, chief executive of DigitalBridge. “The combination of Deutsche Telekom’s leading mobile network and market position, alongside one of the largest real asset managers in the world in Brookfield, combined with the digital infrastructure domain expertise of DigitalBridge, creates a team of unmatched capabilities to support GD Towers as it grows to meet the evolving network demands of enterprises and consumers across Europe.”

“We’re delighted to be partnering with Deutsche Telekom and DigitalBridge to expand our presence in the European telecom infrastructure sector,” said Sam Pollock, managing partner at Brookfield and chief executive of Infrastructure. “This represents a great opportunity to invest in a highly attractive tower portfolio, with highly contracted cash flows and strong upside potential. Brookfield is already a leading global infrastructure investor, with approximately 200,000 telecom tower and rooftop sites under management globally. We hope to bring that experience and expertise to this new partnership, for the benefit of our customers in Germany, Austria and beyond.”

The current GD Towers leadership team of Bruno Jacobfeuerborn, chief executive, and Thomas Ried, chief financial officer, will continue running the business after closing. In addition to its retained 49 percent stake, Deutsche Telekom will also retain significant minority protection rights, including the right to appoint two out of five members of the shareholder committee, including the initial chairman. Furthermore, Deutsche Telekom also has the right to regain control and reconsolidate GD Towers in the future.

According to the statement announcing the deal, the transaction will reduce Deutsche Telekom’s financial leverage by €10.7bn and net debt including leases by €6.5bn. The incremental headroom will mainly be used for deleveraging at the Deutsche Telekom group level and to accelerate the company’s path toward its targeted 50.1 percent share capital interest in T-Mobile US.

The partnership between DigitalBridge and Brookfield saw them beat a KKR & Co.-led consortium for GD Towers. Brookfield’s previous partner, Cellnex Telecom SA, was also interested in the unit but dropped out of the bidding. DigitalBridge, which has a market value of about $3bn, manages almost $47bn of digital infrastructure assets, such as wireless towers, data centres, fibre networks and edge infrastructure, according to its website.

Richard Summerfield