American Tower Corp., the biggest operator of cellular towers in the U.S., agreed to acquire the parent company of rival Global Tower Partners for about $3.3 billion, giving it thousands of additional wireless sites as the appetite for next-generation services grows.
American Tower is buying MIP Tower Holdings LLC, a closely held real estate investment trust that owns Global Tower Partners and related companies, according to a statement today. The deal brings American Tower about 5,400 U.S. towers and the management rights to more than 9,000 additional sites. Including debt, the purchase price is about $4.8 billion.
The tower industry is consolidating, with fewer companies controlling bigger swaths of equipment amid booming demand for mobile communications and the gear needed to transmit signals. Low interest rates also may be spurring American Tower to make deals, said James Moorman, an analyst at S&P Capital IQ Inc.
“This puts them in a good position before interest rates go up,” said Moorman, who has a buy recommendation on American Tower shares. “It also gives them more exposure to the next leg of network expansion, which is starting more quickly than expected due to capacity needs.”
This is the second major acquisition in the past two months by American Tower. Last month the Boston-based company agreed to buy almost 4,500 wireless sites from NII Holdings Inc. in Brazil and Mexico for $811 million.
American Tower shares climbed 4.6 percent to $71.91 at the close in New York. The stock has declined 6.9 percent this year.
Including debt, today’s acquisition would be one of the 10 biggest telecommunications takeovers of the year, according to data compiled by Bloomberg. It follows two blockbuster deals earlier this week: Verizon Communications Inc. agreed to purchase Vodafone Group Plc’s stake in Verizon Wireless for $130 billion, and Microsoft Corp. announced plans to buy Nokia Oyj’s mobile-phone business for $7.2 billion.
American Tower’s acquisition, slated to be completed in the fourth quarter, will generate about $345 million in revenue and $270 million in gross profit next year, the company said. Goldman Sachs Group Inc. and EA Markets Securities LLC served as American Tower’s financial advisers, with Clifford Chance US LLP and Sullivan & Worcester LLP offering legal counsel. Global Tower Partners was advised by Deutsche Bank AG.
“GTP has constructed and acquired an outstanding U.S. portfolio of tower, rooftop and land assets, which is highly complementary to that of American Tower,” Jim Taiclet, chief executive officer of American Tower, said in the statement. “GTP’s management of these assets has been excellent.”
The additional towers will help the company keep up with the shift to fourth-generation networks. Carriers also need greater coverage density as they plan to sell more mobile data services, Moorman said. The four largest U.S. carriers -- all of which are American Tower customers -- are upgrading their systems to a standard called long-term evolution, or LTE, giving users faster access to video and the Web.
American Tower and chief rival Crown Castle International Corp. are playing an increasingly vital role in the wireless industry, with many carriers selling their antennas to the companies and leasing them back. American Tower, which already had about 56,000 properties in its portfolio before today’s transaction, also makes deals with landowners to put cell sites on their land. The infrastructure lets mobile-phone customers place calls and connect to the Internet.
In addition to the domestic towers, the Global Tower deal also will bring 500 communications sites in Costa Rica, American Tower said. The acquisition doesn’t include any antenna sites in Mexico, Taiclet said on a conference call with analysts today.
Global Tower is majority owned by Macquarie Infrastructure Partners, an investment fund in New York and a unit of Sydney-based Macquarie Group Ltd.
The global LTE rollout is poised to keep generating growth for the tower industry for some time, Moorman said.
“We think with the next phase of LTE starting here, and LTE expanding internationally, that growth is still coming for the tower companies,” he said.