Communications Sales & Leasing, Inc. is buying a company that provides infrastructure for telecommunications carriers in a $409 million deal, the company announced Thursday.
Communications Sales & Leasing, also known as CS&L, expects to close on its purchase of PEG Bandwidth LLC from Associated Partners, LP, an investment company, in April, according to the news release. PEG Bandwidth's corporate headquarters is in Cynwyd, Pa.
The deal, which includes $315 million in cash and issuance of stock, is the first acquisition by CS&L since it was spun off into a real estate investment trust (REIT) by Windstream Holdings Inc. early last year.
"PEG will provide us a high growth operating platform as we continue to build a fiber rich REIT focused on acquiring and constructing mission critical communication infrastructure assets," said Kenny Gunderman, president and chief executive officer of CS&L, in a prepared statement.
CS&L stock jumped 4.8 percent Thursday after the company announced its acquisition, and closed at $20.74. Shares of CS&L have traded between $16.96 and $34.63 during the past 52 weeks.
CS&L, which is based in Little Rock, was created when Windstream spun off its copper and fiber networks and other assets into a new, independent, publicly traded company in April. CS&L leases the assets to Windstream in a 15-year lease.
Real estate investment trusts don't pay corporate income tax as long as they give at least 90 percent of their income to shareholders in dividend payments.
Since CS&L's creation the company has been looking to expand by taking advantage of the many copper and fiber lines running through the country.
Gunderman previously told the Arkansas Democrat-Gazette that the company wants to acquire assets from other telephone, cable or Internet providers.
He also said the company would be able to finance projects for carriers that want to build a new network.
PEG Bandwidth has a fiber network that stretches throughout the Northeast, mid-Atlantic, Illinois, and South Central regions, according to the news release.
The company builds fiber networks to cell towers and is focused on the wireless industry, said Barry McCarver, an analyst with Stephens Inc. Stephens, along with Citigroup, served as financial advisors on the transaction.
Unlike the assets from Windstream, those acquired through the purchase of PEG Bandwidth do not qualify as real estate assets, therefore they are taxable, McCarver said.
"This is an acquisition that not only is creative today, but it provides a pipeline for further growth," he said.
Business on 01/08/2016