Stonepeak to take Lumen Technologies private in $2.7bn deal

October 2021 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

October 2021 Issue

Affirming its investment strategy designed to drive future growth, US telecommunications company Lumen Technologies is to sell its Latin American business to alternative investment firm Stonepeak in a transaction valued at $2.7bn.

Under the terms of the definitive agreement, Lumen will divest its Latin American (LATAM) business, which will operate as an independent, US headquartered portfolio company of Stonepeak. AustralianSuper, Australia’s largest pension fund, is investing alongside Stonepeak in the transaction.

For Lumen, the transaction is expected to provide additional capital to enable it to accelerate investments in key growth areas, enable greater flexibility on capital allocation, and allow for debt reduction and the continued evaluation of share repurchases.

“This transaction unlocks value for our shareholders while allowing us to maintain our global presence through our strategic relationship with the new LATAM company,” said Jeff Storey, president and chief executive of Lumen. “This transaction allows Lumen to focus investments in key areas of the business to drive future growth while providing flexibility for our capital allocation strategy.”

For Stonepeak, the transaction represents an opportunity to invest in a LATAM communications platform with an extensive subsea, terrestrial fibre and data centre footprint across the region, including several large metro markets. As with its other communications platforms, Stonepeak plans to invest heavily behind the new LATAM company management team.

“Lumen’s Latin American business is a market leader with a strong footprint and exciting potential for expansion,” said Brian McMullen, senior managing director at Stonepeak. “Stonepeak has been an early and active investor in digital infrastructure globally and we are looking forward to applying our experience and additional capital to Lumen’s Latin American business.”

Lumen will continue to serve customers in North America and the Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) regions with needs in Latin America through its strategic partnership with the new company. This relationship includes reciprocal reselling and network arrangements that leverage each other’s extensive fibre footprints, data centres and other network assets.

Upon completion of the transaction, Lumen’s current Latin American leadership team and organisation will remain in place, led by Hector Alonso, president for the region. Lumen will also retain a strategic relationship with the new company and continue to serve joint customers in LATAM.

“Stonepeak has made it clear that they are committed to enterprises that operate in LATAM,” said Mr Alonso. “This transaction provides the new company with more autonomy to serve its customers and the enhanced ability to react to and invest in changing market conditions in the LATAM region.”

The transaction is expected to close in the first half of 2022, upon receipt of all regulatory approvals in the US and certain countries where the new LATAM company operates, as well as the satisfaction of other customary conditions.

Acting as financial advisers to Lumen are BofA Securities, Morgan Stanley & Co. LLC, Citi and Goldman Sachs. Jones Walker LLP is serving as legal adviser.

Andrew Thomas, managing director at Stonepeak, concluded: “We look forward to partnering with Mr Alonso and his team to expand the network across the entire region and position the new company for long-term growth.”

Fraser Tennant