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Telefónica and Pontegadea buy KKR out of Telxius

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Telefónica and the London-based real estate company Pontegadea are to buy out KKR's 40% stake in Telxius Telecom, which has a 94,000km international network of submarine cables.

Telefónica will increase its stake to 70% and Pontegadea will increase its stake to 30%, through the purchase of a 40% stake previously held by KKR.

The acquisition comes with an estimated price tag of €215.7 million, pending, among other things, the corresponding adjustments derived from the €7.7 billion sale of Telxius' tower business to American Tower last year.

The two said in their announcement that they want to "strengthen their commitment to submarine cables, an asset that has proved critical during the pandemic and whose contribution will be equally fundamental in the development of the new digital era".

Telxius Telecom operates a Tier 1 IP network with a coverage of 93 points of presence and 27 landing stations in 23 countries. In addition, Telxius Telecom offers an extensive range of capacity services, colocation and security services.

Its subsea operations have been bolstered with new generation systems including the Marea, Brusa, Tannat and Mistral cables, as well as SAm-1, the system that connects the United States with Latin America since 2000, among others. As CEO Mario Martin has told Capacity, all projects are interconnected.

Regarding this latest news, Martin wrote in a LinkedIn post that the developments represent a "refreshed invitation to continue growing the business of digital infrastructures based on submarine cables".

"I would like to express my gratitude to KKR & Co. Inc. for continuously encouraging us and supporting our strategy focused on value creation over the years, which allowed us to raise Telxius’ valuation by over €5 bn since they entered the company in late 2017.

"I am sure that, thanks to our extraordinary team, we will achieve many new goals in this promising phase of Telxius that is now beginning," he continued.

The news comes almost five years to the day since KKR committed to buy "up to 40%" of Telxius for €1.27 billion, through its subsidiary Taurus Bidco. At the time the deal gave Telxius an enterprise value of €3.68 billion and came almost six months after Telefónica withdrew a planned sale of its share.

That deal closed in November 2017 and the following July Telefónica said it would sell a 9.99% share of Telxius to Pontegadea, for €378.8 million.

In late 2020 Telefónica hired Société Générale and Greenhill to sell the subsea arm of Telxius, then in March 2021 reports surfaced of a u-turn on this decision. According to Bloomberg, Telefónica instead wanted to on-board private investors to share ownership of the business.

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