I Squared Capital to Acquire Majority Stake in ATC’s India Unit for $1.5-$1.75 Billion

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Both parties had initiated a 60-day exclusivity agreement for bilateral negotiations. This exclusivity period ultimately culminated in American Tower Corp’s decision to divest a minimum of 51% in ATC-TIPL.

Miami-based infrastructure investment firm I Squared Capital is on the verge of securing a substantial majority stake in the Indian division of Boston-based American Tower Corp (ATC), according to sources familiar with the matter. The company is currently finalising the details of its acquisition, which is expected to encompass approximately 65% of ATC Telecom Infrastructure Pvt Ltd (ATC-TIPL), valuing the deal at an estimated enterprise value ranging from $1.5 billion to $1.75 billion. This development disclosed that the two entities had entered a 60-day exclusivity agreement to facilitate bilateral negotiations. These discussions culminated in ATC’s decision to divest at least 51% of its stake in ATC-TIPL. It’s worth noting that ATC will maintain a residual stake in the company. 

The company will take a significant majority stake in ATC-TIPL. On ATC’s part, the initial plan was to divest anywhere from 50% to up to 100% of its India operations. The company had enlisted Citi’s assistance to aid in the divestment process. Nevertheless, potential suitors were not inclined towards a co-control model, which prompted ATC to revise its plan and agree to relinquish majority ownership. Deutsche Bank is advising I Squared on this transaction.

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ATC had informed the US Securities and Exchange Commission (SEC) about its exploration of strategic alternatives, including selling an equity stake in its India operation to private investors. This decision came amid a challenging business environment in India, particularly after Vi (Vodafone Idea) announced it would not resume full contractual payments owed to ATC. Citi was appointed to manage the sale process, while Deutsche Bank advised I Squared. Insiders within the industry disclosed that ATC had initially sought an enterprise value of approximately $3.5 billion to $4 billion for its India unit. This valuation was based on its portfolio of 76,402 Indian towers, estimated to be worth between $40,000 and $50,000 each. The company is utilising funds from its $15 billion Infrastructure Fund III, which closed last year. The fund has already made over 20 investments. Overall, I Squared operates three funds dedicated to infrastructure, credit, and infrastructure technology.

Goodwill Impairment and Premium Valuation Challenges

The company informed the SEC that it had incurred a goodwill impairment charge of $322 million (approximately Rs 2,677 crore) for its India unit in the quarter ending September 2023. This impairment was attributed to ongoing business challenges in India and the company’s plans to sell equity interests in ATC-TIPL. The negotiations between ATC and I Squared faced challenges due to ATC’s insistence on premium valuations. Bidders, including I Squared, rejected these premium valuations due to concerns about future tenancy revenue sustainability. This uncertainty was exacerbated by the ongoing financial struggles of Vi, ATC’s largest customer in India. Vi’s delayed fundraising efforts had also stalled its 5G network rollout, unlike its competitors, Reliance Jio and Bharti Airtel, who were on track to achieve their pan-India 5G coverage targets.

Vi recently extended the redemption period for half of the 16,000 optionally convertible debentures (OCDs) issued to ATC’s India arm from six to 18 months. This development relieved Vi, which owes ATC approximately Rs 2,000 crore. ATC had initially bet on the Indian market’s potential and expanded its tower portfolio aggressively through acquisitions. In 2015, it acquired a 51% stake in erstwhile Viom Networks from Tata Teleservices and SREI Infrastructure Finance for Rs 7,635 crore. After becoming the majority shareholder in Viom, ATC merged its Indian businesses, eventually increasing its stake to 63% in the merged entity, renamed ATC Telecom Infrastructure. Ultimately, ATC gained 100% ownership of its Indian unit, becoming the country’s third-largest tower infrastructure services provider, following Indus Towers and Brookfield-owned Summit Digitel, which acquired Reliance Jio’s telecom towers.

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