September 20, 2021 By: G. F. Gay Le Breton and Ryan Gerton
August saw one of the largest deals involving a Louisiana company over the past 10 years, when Monroe-based telecom giant Lumen Technologies, Inc. agreed to sell a portion of its incumbent local exchange carrier (ILEC) business to New York private equity firm Apollo Global Management, Inc. The deal is valued at $7.5 billion, including debt assumption of approximately $1.4 billion. This transaction enterprise value represents a multiple of approximately 5.5x 2020 estimated adjusted EBITDA.
Known as CenturyLink before its rebranding last September, Lumen will shift its focus towards large enterprise and residential broadband by selling off its local telephone and copper-based broadband businesses in 20 Midwest and Southeast states, including Louisiana. This includes about 6 million customers.
Lumen will retain its ILEC assets in 16 mostly western states, as well as its national fiber routes and CLEC networks. President and CEO Jeff Storey said these markets have significantly higher fiber penetration, population density, enterprise demand and overall growth opportunities than the 20 states Lumen is exiting.
This move appears to be an effort by Lumen management to restructure the company into one being rewarded with higher multiples by public and private investors.
“As we lean into investing for growth and continuing to rationalize the portfolio, I do realize that will put pressure on our dividend after we close these transactions and the further we get into our investment program,” Storey added.
The move came about a week after Lumen agreed to sell its Latin American business to another private equity firm, Stonepeak Infrastructure Partners, for $2.7 billion. The transaction value is approximately 9.0x Lumen Latin America’s 2020 estimated adjusted EBITDA.
Apollo has made a name for itself in part by snapping up businesses deemed non-core by corporations.
“We see an incredible opportunity to provide leading edge, fiber-to-the-home broadband technology to millions of Lumen’s business and residential customers,” said Aaron Sobel, private equity partner at Apollo.
As a standalone company, NewCo will be led by Bob Mudge, Chris Creager and Tom Maguire – industry veterans who together were responsible for the buildout and growth of Verizon’s fiber-based Fios service. The investment from the Apollo Funds will help accelerate the upgrade to fiber optic technologies.
For Apollo, which will gain fiber and copper networks, tower site connectivity and central offices from the Lumen deal, the transaction is part of its larger plan to get more involved in the telecommunications industry. In October 2020, the private equity firm acquired a telecommunications platform owned by Lendlease. Then in May 2021, it purchased Verizon’s media assets for $5 billion, and in July invested $200 million in FirstDigital Telecom, a Utah-based carrier.
Lumen’s deal with Apollo is expected to close in the second half of 2022. Lumen will continue to operate the assets until that time.
Another Louisiana publicly-held company made strategic moves last month as well. Lafayette’s Waitr Holdings, Inc. purchased the assets of three payment processing companies in transactions with a total value of $15 million. Cape Cod Merchant Services LLC, Flow Payments LLC, and ProMerchant LLC, all based in Massachusetts, will bring a range of merchant payment processing solutions to Waitr’s restaurant customers.
Founded in 2013 at McNeese State University by Christopher Meaux, Waitr operates an online ordering technology platform that provides delivery, carryout and dine-in options. Its chairman and CEO Carl Grimstad said that by providing its ecosystem partners with a suite of payment services, including loyalty programs, gift cards, payment processing and merchant lending, Waitr will position itself for significant growth.
The purchase of these new verticals outside of food delivery, along with continued investment in the “last mile delivery” segment through the recent acquisitions of Delivery Dudes in Florida and Bite Squad in Massachusetts, are part of Waitr’s commitment to innovation. In June, Waitr announced its intention to rebrand, including changing the name of the company, in an effort to unify its offerings and better reflect its long-term business strategy. There is no word yet on the new name.
Majority ownership of Waitr was sold in 2018 to Fertitta Entertainment, the owner of the NBA’s Houston Rockets. Waitr went public in 2018.
G.F. Gay Le Breton is managing director for Chaffe & Associates Inc., responsible for the merger and acquisition activities of the firm. Ryan Gerton is an associate with the firm.
Investment banking services are provided by Chaffe Securities Inc., member FINRA/SIPC.