Communications, MSP, MSSP and telecom giant Lumen Technologies is selling its Latin American business to private equity firm Stonepeak Partners for $2.7 billion. AustralianSuper, Australia's largest pension fund, is also investing in the acquisition.
The deal's valuation is roughly 9X Lumen Latin America's 2020 estimated adjusted EBITDA, the seller says. That valuation is relatively reasonable and below several of the lofty MSP and telecom M&A deals that ChannelE2E has tracked in 2021.
This is technology M&A deal number 457 that ChannelE2E has covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.
Lumen, formerly CenturyLink, has been seeking to double down on growth opportunities while potentially shedding some assets to pay down debt. Indeed, the Stonepeak deal comes amid recent rumors that Lumen may sell its consumer telecom & Internet business to private equity firm Apollo Global Management for $5 billion. Still, that rumored consumer deal has yet to be confirmed.
Lumen, Stonepeak and LATAM: Deal Details
Lumen has a global fiber optics network that extends across 60 countries. The company's core services include adaptive networking, edge cloud, managed security, communications and collaboration services.
Under Stonepeak's ownership, the Latin America (LATAM) business will be renamed while continuing to offer fiber optic, data center and network services throughout the region. The current Latin American leadership team and organization will remain in place, led by Hector Alonso, Lumen's president for the region. The LATAM business's new name has yet to be disclosed.
Stonepeak has data center, cloud and service provider and broadband investment experience. Key holdings include:
- Cologix, a provider of co-location data center services;
- Digital Edge, an Asia-Pacific data center company;
- euNetworks Holdings, a Western European bandwidth company;
- Extenet Systems, a converged communications infrastructure and fiber network services provider; and
- Xplornet Communications, a Canadian rural broadband service provider.
Lumen, meanwhile, will continue to serve customers in North America, EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific) regions with needs in Latin America through its strategic partnership with the New LATAM Company.
Lumen, Stonepeak LATAM Deal: Executive Perspectives
In a prepared statement about the deal, Lumen President and CEO Jeff Storey said:
"This transaction unlocks value for our shareholders while allowing us to maintain our global presence through our strategic relationship with the New LATAM Company. 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."
Added Brian McMullen, Stonepeak senior managing director:
"Lumen's Latin American business is a market leader with a strong footprint and exciting potential for expansion. 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."
"Stonepeak has made it very clear that they are committed to enterprises that operate in Latin America. This transaction provides the New LATAM Company with more autonomy to serve its customers and the enhanced ability to react to and invest in changing market conditions in the Latin America region. These customers will experience the same world-class network and services they have come to expect from a leadership team focused on their success."
Concluded Andrew Thomas, Stonepeak managing director:
"We look forward to partnering with Hector and his team to expand the network across the entire region and position the platform for continued long-term growth."
Lumen and Stonepeak expect the deal to be completed in the first half of 2022, pending various regulatory approvals in the United States and countries in which the LATAM company operates.