Altice USA said Tuesday it has reached an agreement to sell a 49.99% interest in its Lightpath business telecom unit to Morgan Stanley Infrastructure Partners in a deal with an implied enterprise value of $3.2 billion.
Altice USA has been shopping the Lightpath unit for more than a year. The fiber-based enterprise business services company offers telecom services to medium and large-sized businesses in the New York metropolitan area. Lightpath customers include health care, financial, education, legal and professional services companies, as well as the public sector and communication providers and local exchange carriers.
Altice USA was in talks last July to sell a minority stake in Lightpath to New York private equity firm Stonepeak Infrastructure Partners, but those negotiations broke down. It is unclear when Morgan Stanley stepped in, but Altice USA said it expects the deal to close in the fourth quarter.
Morgan Stanley Infrastructure Partners was founded in 2006 and has made 30 investments across three global funds with more than $13 billion of capital commitments. Its investors include some of the largest pension, sovereign wealth and insurance companies in the world.
Altice USA said the sale represents a 14.6 times multiple to its 2019 adjusted earnings before interest taxes depreciation and amortization (EBITDA). As part of the deal, Altice USA will receive total gross cash proceeds of $2.3 billion from the sale and related financing activity (about $1.1 billion after tax and initial debt repayment). Altice USA also will retain a 50.01% interest in Lightpath and maintain control of the company.
Altice USA said that as a strategic investor, MSIP will help support ongoing and new growth initiatives at Lightpath, improve the unit’s operational performance and provide strategic and financial flexibility.
“Lightpath is an expansive and best-in-class enterprise fiber communications business with tremendous long-term potential,” Altice USA CEO Dexter Goei said in a press release. “Bringing in a strategic investor allows Altice USA to focus on operating our core businesses while infusing the capital needed to grow Lightpath and maximize shareholder value. We are pleased to partner with MSIP, a leading investor in telecommunications infrastructure with deep operational and management expertise, to propel Lightpath and unlock its future potential.”
Goldman Sachs & Co. LLC acted as financial advisor to Altice USA. Shearman & Sterling LLP, Mayer Brown LLP and Ropes & Gray LLP served as legal advisors to Altice USA. Evercore acted as financial advisor and Simpson Thacher & Bartlett LLP served as legal advisor to Morgan Stanley Infrastructure Partners.