AT&T has inked a deal to acquire Straight Path Communications, a company that holds a swath of 39 GHz and 28 GHz spectrum, in all-stock deal that carries a total value of $1.6 billion.
Under the deal, AT&T will acquire Straight Path for $95.63 per share, implying a premium of 204% to the closing price of Straight Path common stock of $31.41 on Jan. 11, 2017, the day before the company announced an FCC settlement of $15 million and a plan to pursue strategic alternatives process (which included a possible sale of assets).
The FCC settlement resolved an investigation into Straight Path’s failure to deploy wireless services as required under its FCC spectrum licenses. The settlement for this case of spectrum squatting also called on Straight Path to surrender to the Commission 196 of its licenses in the 39 GHz spectrum band, sell the remainder of its license portfolio, and remit 20% of the proceeds of that sale to the Treasury as an additional civil penalty.
The deal price also represents a premium of 162% to the closing price of Straight Path stock of $36.48 on April 7. Straight Path shareholders will receive $1.25 billion, paid using AT&T stock.
According to the company’s web site, Straight Path holds 868 FCC spectrum licenses providing wireless coverage of the entire United States.
AT&T will be looking for Straight Path’s spectrum holdings to shore up its 5G strategy. Of recent note, AT&T teamed with Nokia to test 5G fixed-wireless streaming of the DirecTV Now OTT TV service over a system that utilizes 39 GHz spectrum.
AT&T and Straight Path said the deal has been approved by the boards of both companies, and has the support of Straight Path’s majority shareholder, Howard Jonas, who has entered into a voting agreement with AT&T and agreed to vote his Class A shares, held through a trust.
The companies expect to close the deal within 12 months.
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In Q2, Straight Path had revenues of $0.2 million, and posted a net loss of $25.4 million, and ended the period with cash and cash equivalents of $7.8 million. It also secured a loan for $17.5 million in February 2017, led by Clutterbuck Capital Management LLC.
Evercore served as exclusive financial advisor to Straight Path and Weil, Gotshal & Manges LLP served as company counsel on this transaction.