Uniti Group Inc. has entered into a definitive agreement to acquire privately-held Southern Light, LLC (“Southern Light”) for aggregate consideration of approximately $700 million in cash and equity, subject to adjustment in accordance with the acquisition agreement.
“This acquisition transforms Uniti Fiber into a more competitive provider of fiber infrastructure solutions. Southern Light scales our products and capacity with wireless carriers, enterprise, wholesale, and E-Rate customers across a significantly expanded Uniti Fiber network, and launches us into the important military sector,” said Kenny Gunderman, President and Chief Executive Officer of Uniti.
Mr. Gunderman continued, “Southern Light’s revenues are well diversified, with 50% from national wireless carriers, 30% from wholesale and enterprises, and 14% from government and E-Rate customers. Pro-forma for this transaction and our recently announced acquisition of Hunt Telecommunications, LLC (“Hunt”), Uniti is expected to increase non-Windstream revenue to approximately 30% of total revenues.”
Andy Newton, Southern Light’s Chief Executive Officer, commented, “We’re thrilled that this next step in our evolution will benefit our customers and our employees. Combining Uniti’s broad reach and financial capacity with our local market experience and company culture represents a tremendous platform for continued growth. We share similar objectives and values and have great respect for what Uniti has achieved and are excited about our future together.”
Southern Light is a provider of data transport services along the Gulf Coast region serving twelve Tier II and Tier III markets across Florida, Alabama, Louisiana, Georgia, and Mississippi. Southern Light’s dense regional fiber network comprises nearly 540,000 fiber strand miles, 5,700 fiber route miles, and over 4,500 on-net locations. Southern Light and Hunt will double Uniti Fiber’s operational network to encompass over one million fiber strand miles, and increase Uniti’s aggregate strand miles to over 4.8 million. Southern Light’s infrastructure solutions include fiber-to-the-tower backhaul, dark fiber, and small cells, and it is currently deploying nearly 1,000 route miles of dark fiber for a major wireless carrier.
Pro forma for both Southern Light and Hunt, Uniti Fiber’s revenues under contract will exceed $1.2 billion. Southern Light enters 2017 with revenues under contract exceeding $435 million and an average remaining contract life of over 10 years, providing excellent forward revenue visibility.
Southern Light’s organization and operations are highly complementary to Hunt and both will be tightly integrated into Uniti Fiber. The Company expects to achieve annual run-rate cost savings related to its acquisition of Southern Light of $10 million within 24 months after closing, as well as additional capital expenditure and revenue synergies. These cost savings are incremental to the previously announced savings of $2.5 million associated with the acquisition of Hunt.
Aggregate consideration for this transaction will be $700 million, consisting of $635 million in cash, subject to certain adjustments set forth in the transaction documents, and the issuance of approximately 2.5 million operating partnership units, convertible on a one-for-one basis into shares of Uniti’s common stock. The transaction is expected to close during the third quarter of 2017 and is subject to customary closing conditions.
The Company has received committed financing from Citigroup Global Markets Inc. (“Citigroup”), JPMorgan Chase Bank, N.A. and RBC Capital Markets, LLC (“RBC”) for the entire cash portion of the purchase price. The Company expects to fund the transaction with cash on hand, proceeds from potential debt or equity financings and borrowings under its revolving credit facility. The Company’s permanent financing is expected to include approximately $250 million in debt and approximately $450 million in equity with proceeds to pay the cash consideration for Southern Light, and the cash consideration for the previously announced Hunt acquisition. This transaction is intended to be leverage neutral on a pro forma basis following the expected permanent financing.