Spark sells 70% of its TowerCo to Ontario Teachers for $900m

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Spark New Zealand has sold a 70% interest in its TowerCo business to Ontario Teachers’ Pension Plan Board (Ontario Teachers) for $900 million.

"The transaction will deliver proceeds of $900 million, enabling direct shareholder returns and investment in future growth opportunities that will accelerate Spark’s transition from traditional telecommunications to higher growth digital services," said Justine Smyth, chair, Spark New Zealand.

According to Smyth, Spark will publish an updated capital management policy as part of its FY22 results that aims to maximise returns to shareholders, invest in future growth, and maintain financial flexibility.

"The capital management policy will provide clarity on the proportion of proceeds allocated to each of these areas and the most effective means of returning proceeds to shareholders,” she said.

Spark’s TowerCo business (TowerCo) is comprised of approximately 1,263 sites and 70% interest stake values the business at $1.175 billion. The expected net cash proceed of $900 million is subject to Overseas Investment Office approval, and the transaction is due to complete in the first half of 2023.

“The acquisition of a 70% stake in TowerCo is an ideal fit for our growing global portfolio of high-quality infrastructure assets," said Bruce Crane, senior managing director and head of Asia Pacific infrastructure & natural resources at Ontario Teachers.

"This investment builds on our long track record of investing in superior businesses in New Zealand and will draw on our deep experience investing in digital infrastructure businesses globally.

Under the terms of the deal, Spark has entered into a 15-year agreement with TowerCo for secure access to existing and new towers, with a build commitment of 670 sites over the next 10 years. The agreement also makes for rights of renewal.

“As part of the deal, we have committed a substantial build programme to TowerCo, with 670 sites to be built over the next decade," added Jolie Hodson, CEO of Spark.

“Spark is the anchor tenant and retains a 30% stake in TowerCo, ensuring we are a key strategic partner as the business grows. We will also continue to own all the ‘smarts’ of our network – such as radio equipment and spectrum – which is what drives our competitive advantage and differentiation in the market.”