Private equity, Content

Cincinnati Bell Buyout Bidding War?: Service Provider Receives Second Offer

Cincinnati Bell has received an unsolicited buyout bid from an infrastructure fund whose name has not been disclosed. The new bid -- valued at $12.00 per share -- comes roughly one month after Brookfield Infrastructure Partners agreed to buy Cincinnati Bell for $10.50 per share.

Cincinnati Bell is now in discussions with the unnamed fund. But for now the existing M&A agreement with Brookfield remains in effect, the telecom company's board says.

Cincinnati Bell has also warned shareholders that there can be "no assurances that discussions with the Fund will result in a binding proposal or that a transaction with the Fund will be approved or consummated."

Cincinnati Bell: The Company Sale Process

The two big questions:

  • Will Cincinnati Bell reach a deal to sell the company to the mystery bidder?
  • Will Brookfield Infrastructure need -- and decide -- to counter the mystery bidder's offer price for Cincinnati Bell?

Brookfield Infrastructure in December 2019 disclosed plans to acquire Cincinnati Bell for $2.6 billion including debt, or roughly 6.5 times annual adjusted EBITDA, according to ChannelE2E’s estimates.

Cincinnati Bell owns CBTS and OnX — two MSP (managed IT services provider) subsidiaries that offer end-to-end IT solutions for U.S. and Canadian enterprise customers. Also, Cincinnati Bell in mid-2018 acquired Hawaiian Telcom to gain scale and fiber network infrastructure. That deal included direct access to the historic SEA-US Trans-Pacific fiber cable linking Asia to the United States.

Brookfield owns and operates a global network of companies in the utilities, transportation, energy, and data infrastructure sectors, with operations throughout the Americas, Asia Pacific, and Europe. Brookfield Infrastructure is part of Brookfield Asset Management, a global alternative asset manager with more than $500 billion in assets.

Service Provider and Technology Bidding Wars

Cincinnati Bell is the latest technology service provider and solutions provider to publicly an M&A bidding war.

Additional examples include:

All of the bidding wars have involved private equity firms -- which are flush with cash (i.e., "dry powder") to pursue buyouts. Indeed, private equity investors are sitting on a record $1.5 trillion in cash as of early 2020, according to Preqin. Yes, that’s trillion — with a T. That is the highest on record and more than double what it was five years ago, CNBC reports. Amid that reality, private equity firms are scrambling to make investments.

M&A activity among IT service providers is off to a strong start for 2020. As of late January, ChannelE2E has already tracked 75 M&A deals in 2020. See the complete M&A deal list here.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.