Lumen in surprise $2.7bn sell-off of Latin American network

Hector Alonso Lumen.jpg

Lumen Technologies is selling off its Latin American business for US$2.7 billion, the company announced this morning.

In a surprise announcement, the company – formerly called CenturyLink – said the buyer is Stonepeak, which three years ago bought euNetworks and last year bought Astound Broadband.

Lumen president and CEO Jeff Storey said: “This transaction allows Lumen to focus investments in key areas of the business to drive future growth while providing flexibility for our capital allocation strategy.”

The deal will need regulatory approval, a process that is likely to continue through the first half of 2022.

Under the new ownership the Latin American operation will continue to be headed by Hector Alonso (pictured), now Lumen’s president for the region.

Lumen said it will also retain a strategic relationship with the newly independent Latin American operation “and continue to serve joint customers in the region”.

In February Lumen said it had nearly quadrupled the capacity of its content distribution network in Latin America, strengthening service capabilities in seven countries, Argentina, Brazil, Chile, Colombia, Ecuador, Mexico and Peru.

Storey said today: “This transaction unlocks value for our shareholders while allowing us to maintain our global presence through our strategic relationship with the new Latam company.”

Stonepeak’s senior managing director, Brian McMullen, said that “Lumen’s Latin American business is a market leader with a strong footprint and exciting potential for expansion”.

AustralianSuper, Australia’s largest pension fund, is investing alongside Stonepeak in the transaction. Last year GTT said it was talking to AustralianSuper and Australian bank Macquarie Capital about buying its infrastructure division for $2.15 billion. However, a month later I Squared Capital won the bid, though that still has not been completed as GTT’s share price has continued to fall.

Stonepeak said this morning: “The transaction represents an opportunity to invest in a Latin American communications platform with an extensive subsea, terrestrial fibre and data centre footprint across the region, including several of its large metro markets”.

Stonepeak said it “plans to invest heavily behind Alonso and the … management team”.

Lumen said the price means it “monetises an attractive asset” at about nine times the Latin American business’s estimated adjusted EBITDA for 2020.

The $2.7 billion “provides additional capital to enable Lumen to accelerate investments in key growth areas”, Lumen said. The deal “enables greater flexibility on capital allocation, allowing for debt reduction and the continued evaluation of share repurchases”.