American Tower Corp., the largest U.S. operator of mobile-phone towers, agreed to acquire almost 4,500 wireless sites from NII Holdings Inc. in Brazil and Mexico for a total of $811 million.
Under the terms of the deal, NII’s Brazilian and Mexican units will lease back the towers from American Tower for at least 12 years, according to a statement today. The assets will generate about $149 million in annual revenue and $55 million in gross margin, American Tower said.
Wireless carriers are increasingly doing deals with tower companies where they lease back the sites, giving an infusion of cash and freeing them up to focus on their main businesses. Reston, Virginia-based NII had previously said it was looking to sell the towers, which Wells Fargo & Co. estimated would bring in $800 million to $900 million.
The deal “provides significant cash to the balance sheet with no major debt obligations due until 2016,” said Kevin Stadtler, president of Fort Worth, Texas-based Stadtler Capital Management LLC, which owns 175,000 NII shares.
American Tower shares rose 1.7 percent to $70.16 at the close in New York. NII fell 2 percent to $6.54, signaling that investors were already anticipating the transaction.
NII, which offers service under the Nextel brand, is selling off assets to fund network improvements in Brazil and Mexico, its two largest markets. The company reached a deal in April to sell its Peru unit to Chile’s Empresa Nacional de Telecomunicaciones SA. NII also has said it’s reviewing whether to part with its Argentina and Chile divisions.
For American Tower, the transaction helps it expand in markets that aren’t as saturated and still upgrading to next-generation networks. The deal is slated to close in the fourth quarter and will initially include about 4,000 towers. In all, American Tower will acquire 2,790 sites in Brazil and 1,666 in Mexico.
“We anticipate leveraging the strong demand backdrop in both markets to drive meaningful revenue and cash flow growth for many years to come,” Jim Taiclet, chief executive officer of Boston-based American Tower, said in the statement.
Evercore Partners Inc. served as American Tower’s financial adviser, while Kilpatrick Townsend & Stockton provided legal counsel. NII was advised by Deutsche Bank AG, Jones Day and Lape Mansfield Nakasian & Gibson LLC.
NII is attempting a turnaround under Steve Shindler, who returned to the CEO job last year after the company posted losses in four out of five quarters. It’s converting its network to third-generation, or 3G, technology in a bid to catch up to competitors such as America Movil SAB and Telefonica SA, which are already beginning upgrades to 4G.
The proceeds from the American Tower deal, when added to NII’s $1.8 billion in cash and $380 million in financing arrangements, will provide “significant liquidity to support the long-term investments we are making to drive profitable growth for the company,” Chief Financial Officer Juan Figuereo said in a statement.
NII’s second-quarter loss, leaving out the Peru business, widened to $384.9 million, or $2.23 a share, from $85.3 million, or 50 cents, a year earlier. Sales slid 11 percent to $1.26 billion.