Digital 9 Infrastructure PLC DGI9 agrees to acquire stake in Arqiva (2122Q)

TIDMDGI9

RNS Number : 2122Q

Digital 9 Infrastructure PLC

27 June 2022

27 June 2022

DIGITAL 9 INFRASTRUCTURE PLC

("DGI9", the "Company" or, together with its subsidiaries, the "Group" )

Digital 9 Infrastructure agrees to acquire stake in Arqiva, a UK data, network and communications service provider

Digital 9 Infrastructure plc (ticker: DGI9), a leading investor in the infrastructure of the internet, is pleased to announce that it has agreed the terms of an acquisition of a 48.02%(1) voting stake (the " Acquisition ") in Arqiva Group Limited (" Arqiva ").

The Completion of the Acquisition is subject to customary regulatory approvals. The Acquisition will be funded through a combination of GBP300.0 million in cash and a vendor loan note.(2)

The stake is being acquired from Canada Pension Plan Investment Board (" CPP Investments (TM)"). CPP Investments first acquired a stake in Arqiva in 2009. The remaining shares in Arqiva are held by its existing shareholders.

Arqiva is a UK-based data, network and communications service provider, the sole operator of digital terrestrial television and radio infrastructure in the United Kingdom and an Internet of Things ("IoT") connectivity platform for utilities, including a smart water metering platform working at scale in the UK. Amongst others, it owns the following national UK infrastructure:

   --   c.1,450 broadcast transmission sites: ensuring Public Service Broadcasters can meet their government-mandated coverage obligations to deliver impartial and trusted content to UK viewers. 

-- Satellite ground infrastructure: delivering 1,100 TV channels internationally to five continents, via 80 ground stations accessing over 30 third-party owned satellites.

-- National IoT utilities connectivity platform: enabling smart metering and more efficient network monitoring and management for utility companies. Over 12 million premises connect to Arqiva's smart meter networks with 50 million data points delivered daily.

Financial Highlights

The Acquisition has been funded through a combination of GBP300.0 million in cash (the " DGI9 Equity ") and a GBP159.3 million non-recourse vendor loan note.(2) The DGI9 Equity component will be funded through the Group's existing cash resources including its Revolving Credit Facility. The valuation for the Acquisition has been based on the financial results of Arqiva as at 30 June 2021, being the latest audited accounts. At that date, the business reported a total EBITDA of GBP332.4 million and GBP1,878.3 million of net external debt.(3)

Investment Rationale

Arqiva provides the Company with a unique opportunity to benefit from:

-- Further portfolio diversification across the digital infrastructure asset classes in which the Company invests.

-- Significant and highly visible Sterling-denominated cash flow generation, part of which is regulated by Ofcom.

-- A weighted average contract length of c.8 years(4) with inflation protection against 69% of the revenues Arqiva generates.

-- Long-established customer relationships, and a high quality, blue-chip customer base including the BBC, ITV, Discovery, BT Sport, and Sky.

-- Attractive and growing national IoT platform providing connectivity for utilities, connecting over 15 million business and consumer premises.

The investment in Arqiva continues to support the Company's investment purpose which aligns to United Nations Sustainable Development Goal #9, specifically:

-- Enabling connectivity to those unable to access or afford modern internet access; Arqiva is the only means by which just under 8 million adults access TV. Included in this group are some of the most vulnerable in society; 3 million of these people live alone, 4 million belong to the C2DE socio-economic group, and nearly 1.8 million have a disability.(5)

-- Ensuring a more efficient use of natural resources through the Arqiva IoT and connectivity platform. Arqiva's IoT connectivity private network infrastructure enables business and customers to manage energy and water resources with less wastage.

Portfolio Composition

Following the investment in Arqiva, the Company has built a c.43% pro forma exposure to wireless networks, complementing its c.39% exposure to data centres and c.18% to subsea fibreoptic networks.

Phil Jordan, Chair of Digital 9 Infrastructure plc, commented:

"We believe the safe and reliable access to data and content across multiple devices and the closer connectivity between broadcasters, utilities and their customers will contribute to the UK's sustainable economic development. Arqiva is a long-standing trusted communications infrastructure operator in the UK and complements our investment mandate to build resilient infrastructure, promote inclusive and sustainable industrialisation, and foster innovation. Arqiva expands the Company's exposure to wireless networks and will support the Company's total return and yield targets as we continue to build a high-quality portfolio of scalable platforms and technologies."

Thor Johnsen, Head of Digital Infrastructure at Triple Point Investment Management LLP, commented:

"The core, contracted nature of Arqiva's national broadcasting service is complemented by its high growth and innovative smart metering and connectivity solutions. The business benefits from the utility sector's need to manage data more effectively across networks, whilst it continues to maintain long-term cash flow from its national broadcasting service."

1 The interests being acquired include a shareholder loan which will result in DGI9 acquiring a 51.76% economic interest at current valuation levels, and 48.02% equity, in Arqiva.

2 VLN estimated funding of GBP159.3m as at June 30, 2022. The VLN amount is subject to certain adjustments at closing, including any potential dividend distributions. The acquisition will take several months to close and is subject to various regulatory approvals and notifications.

3 Source: Arqiva Group Limited Annual Report 2021 ; includes fair value of swaps.

4 From core contracts that represent 73% of forecasted revenues in FY22.

5 Hind, G., Harrington, T. and Standen-Jewell, T., 2022. BBC and subscription. Impractical and not inclusive. Enders | Analysis, p.2.; C2DE as defined in the NRS social grades classification.

S. 

CONTACT DETAILS

 
 Triple Point Investment Management LLP (Investment 
  Manager) 
  Thor Johnsen 
  Arnaud Jaguin 
  Andre Karihaloo                                      [phone] 
 J.P. Morgan Cazenove (Corporate Broker) 
  William Simmonds 
  Jérémie Birnbaum                           [phone] 
 Rothschild & Co (M&A Adviser) 
  Ali Kazmi 
  Alice Maynell 
  Nitant Gupta                                         [phone] 
 
                                                         [phone] 
 FTI Consulting LLP (Communications Adviser)             032 
  Mitch Barltrop                                         [phone] 
  Ed Berry                                               199 
  Gina Magnin                                            [phone] 
  [e-mail]                                 751 
 

LEI: 213800OQLX64UNS38U92

NOTES TO EDITORS

Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the London Stock Exchange. The Company invests in the infrastructure of the internet that underpins the world's digital economy: digital infrastructure.

The number 9 in Digital 9 Infrastructure comes from the UN Sustainable Development Goal 9, which focuses the fund on investments that increase connectivity globally and improve the sustainability of digital infrastructure. The assets DGI9 invest in typically comprise scalable platforms and technologies including (but not limited to) subsea and terrestrial fibre, data centres, and wireless networks.

With its IPO in March 2021 and three subsequent placings, DGI9 has raised total equity of GBP845 million, with a further GBP300 million through a revolving credit facility, and invested into data centres, subsea fibre, and wireless networks:

-- Aqua Comms , a leading owner and operator of 20,000km of the most modern subsea fibre systems - the backbone of the internet - with a customer base comprising global tech and global telecommunications carriers (April 2021);

-- Verne Global , the leading Icelandic data centre platform, with 40MW of high intensity computing solutions in operation or development, powered by 100% baseload renewable power (September 2021);

-- EMIC-1 , a partnership with Meta on a 10,000km fibre system from Europe to India (July 2021);

-- SeaEdge UK1 , a data centre and landing station for the North Sea Connect subsea cable, part of the North Atlantic Loop subsea network, improving connectivity between the UK, Ireland, Scandinavia and North America (December 2021);

-- Host Ireland , a leading enterprise broadband provider that owns and operates Fixed Wireless Access networks (April 2022);

-- Volta , a premier data centre based in central London, providing 6MW retail co-location services (April 2022);

-- Ficolo , a leading Finnish data centre and cloud infrastructure platform, with c.23MW of data centre capacity, powered by 100% renewable power and distributing surplus heat to district heating networks (announced April 2022); and,

-- Arqiva , the only UK national terrestrial television and radio broadcasting network in the United Kingdom - providing data, network and communications services, as well as a national IoT connectivity platform (announced June 2022).

The Investment Manager is Triple Point Investment Management LLP (" Triple Point ") which is authorised and regulated by the Financial Conduct Authority, with extensive experience in infrastructure, real estate and private credit, while keeping ESG principles central to its business mission. Triple Point's Digital Infrastructure team has over US$ 300 billion in digital infrastructure transaction experience and in-depth relationships across global tech and global telecoms companies. For more information, please visit www.triplepoint.co.uk .

The Company's Ordinary Shares were admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange on 31 March 2021.

For more information, please visit www.d9infrastructure.com .

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June 27, 2022 02:00 ET (06:00 GMT)