Uniti Group Inc., the former spinoff of Windstream Holding Corp., has entered into a definitive agreement to acquire privately-held Southern Light LLC in a deal worth $700 million in cash and stock, the companies announced Monday (April 10).
“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 Unit President and CEO Kenny Gunderman.
The deal with Mobile, Ala.-based Southern Light, the largest since the company became Arkansas’ first public traded real estate investment trust in April 2015, comes nearly two months after the former Communication Sales & Leasing (CS&L) took further steps to fully break away from its ties to former parent, Windstream Corp. On Feb. 23, the Little Rock-based REIT announced plans to change its bulky corporate name to Uniti Group, and begin trading under the stock symbol UNIT on the Nasdaq Stock Exchange. On the same day, the company signed a deal to acquire Hunt Telecommunications for an initial consideration of $170 million in cash-and-stock.
Gunderman said 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. Southern Light offers data transport services along the Gulf Coast region serving a dozen attractive Tier II and Tier III markets across Florida, Alabama, Louisiana, Georgia and Mississippi.
Southern Light’s organization and operations are also complementary to Hunt and both will be integrated into Uniti Fiber, company officials said. The Little Rock real estate trust said it 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.
Southern Light’s dense regional fiber network comprises nearly 540,000 fiber strand miles, 5,700 fiber route miles, and more than 4,500 on-net locations. Those assets will likely align with the operations of Hammond, La.-based Hunt Telecom, a provider of data transport to K–12 schools and government agencies with a dense network of 140,000 fiber strand miles and 2,600 fiber route miles in Louisiana.
Altogether, Southern Light and Hunt will double the Little Rock company’s operational network to more than one million fiber strand miles, and increase Uniti’s aggregate strand miles to more than 4.8 million. Southern Light’s infrastructure includes fiber-to-the-tower backhaul, dark fiber, and small cells, and is deploying nearly 1,000 route miles of dark fiber for a major wireless carrier.
Gunderman forecasts with Southern Light and Hunt sales on the book, 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, he said.
The terms of the deal will include $700 million, consisting of $635 million in cash 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, subject to customary closing conditions.
Following the spinoff of CS&L in April 2015, Windstream retained a 20% equity stake in the state’s first publicly held REIT. Through the combination of a debt-for-equity exchange for 14.7 million shares with creditors, Windstream sold off of all of its CS&L shares in June 2016 to retire approximately $672 million in debt.
Since then, Uniti has been on an acquisition spree, starting with $409 million purchase of Lewisville, Texas-based PEG Bandwidth in May 2016. The former CS&L closed another deal for $3 million in 2016 with its former parent to acquire 32 wireless towers owned by Windstream as well as operating rights for 49 wireless towers previously conveyed to the trust following the spinoff.
Uniti also has invested another $3 million in wireless tower assets, including the acquisition of Summit Wireless Infrastructure LLC. Summit is a wireless infrastructure provider in Mexico and was recently awarded an agreement to construct wireless towers for a major international wireless carrier.
In connection with each of those deals, Uniti has also bulked up its executive ranks and board of directors with expertise from those merged companies. Company officials did not respond to Talk Business & Politics queries concerning its total employee count. Southern Light’s website shows that the Alabama fiber optic provider has 230 employees and posted $75 million in revenues in 2016.