Goldman Sachs-backed broadband firm nears investment deal with Abu Dhabi Fund
Investment would value U.K.-based CityFibre at more than $2.7 billion amid a race to build out superfast fiber-optic networks
An investment group that includes Abu Dhabi’s sovereign-wealth fund is close to acquiring a minority stake in CityFibre Infrastructure Holdings in a deal that would value the U.K. fiber-optic-broadband provider at more than $2.7 billion, according to people familiar with the matter.
The investment would be from Abu Dhabi’s Mubadala Investment Co. and the investment arm linked to the family behind IKEA, the people said.
It comes as wholesale broadband network providers like CityFibre and incumbent telecom operators such as AT&T Inc. in the U.S. and Britain’s BT Group PLC are racing to expand their high-speed networks to reach more customers and support the rollout of superfast 5G wireless services.
GOLDMAN SACHS TO PAY JUNIOR BANKERS MORE THAN ANY OTHER WALL STREET FIRM
At the same time, the promise of recurring revenue generated from the high-speed transmission of video and other bandwidth-hogging data is drawing investors seeking steady long-term returns.
The deal, if finalized, is expected to be announced over the coming weeks and would value CityFibre at more than £2 billion, equivalent to $2.7 billion, the people said.
Khaldoon Al Mubarak, chief executive officer of Mubadala Investment Co., attends a panel session during the Bloomberg Invest Asia forum in Hong Kong, China, on Thursday, March 21, 2019. Photographer: Anthony Kwan/Bloomberg via Getty Images
CityFibre is controlled by an infrastructure arm of Goldman Sachs Group Inc. and European buyout firm Antin Infrastructure Partners, which together acquired the business in 2018 for £537.8 million.
Based in London, CityFibre is expected to raise more than £500 million from the stake sale to Mubadala and Interogo Holding AG, a Switzerland-based vehicle that invests in infrastructure and other assets to generate returns to help ensure IKEA’s independence.
Mubadala oversees a total of about $243 billion in assets and a bet on CityFibre would be consistent with prior investments in the sector. In 2018, the fund acquired a minority stake in Hyperoptic Ltd., another U.K. broadband provider, for an undisclosed amount. It then sold that holding the next year to U.S. buyout firm KKR & Co.
GOLDMAN SACHS 2Q PROFITS BEAT FORECASTS; BOOSTS DIVIDEND
CityFibre also plans to issue new debt as part of the deal, the people said, giving the broadband network provider a total of around £1 billion in new money to help fund its network rollout.
CityFibre’s networks are located in more than 60 towns and cities in the U.K., according to its website. Customers include Vodafone Group PLC, which uses the networks to offer high-speed internet service in parts of Britain, and the U.K.’s Three to support its 5G wireless services. Three is owned by Hong Kong-based conglomerate CK Hutchison Holdings Ltd.
The new funding is expected to support CityFibre’s existing plan to invest £4 billion to expand its services to another 216 towns and villages by 2025 as it seeks to cover close to a third of the U.K. market.
Still, Mubadala and Interogo’s investment in CityFibre carries risks, coming amid signs of increasing competition.
CLICK HERE TO READ MORE ON FOX BUSINESS
BT, which also offers wholesale broadband services, said in May it might seek a partner to accelerate its network fiber rollout to reach 25 million premises in the U.K. by 2026, up from a previous target of 20 million. In July, Virgin Media O2, jointly owned by John Malone’s Liberty Global PLC and Spain’s Telefónica SA, announced plans to upgrade its network, paving the way for it to potentially enter the U.K. broadband wholesale market.