Lumen Technologies (NYSE: LUMN) says it has agreed to sell today announced it has entered into a definitive agreement to sell its incumbent local exchange carrier (ILEC) assets and operations in 20 U.S. Midwest and Southeast states to funds managed by affiliates of Apollo Global Management, Inc. (NYSE: APO). The Apollo Funds will pay $7.5 billion for the assets, including debt assumption of approximately $1.4 billion, and subject to working capital and various other purchase price adjustments. Lumen expects the deal to be roughly leverage neutral, with an expected close in the second half of 2022, subject to customary closing conditions including required regulatory approvals.
The Apollo Funds will assume ownership of the consumer, small business, wholesale, and mostly copper-served enterprise customers and assets in the 20 states. Overall, the Apollo Funds will acquire:
- Local fiber and copper networks
- Broadband and voice for consumer, enterprise and wholesale customers
- Fiber and copper connectivity to enabled buildings
- Connectivity to tower sites
- Central offices.
Lumen says the transaction enterprise value represents a multiple of approximately 5.5X 2020 estimated adjusted EBITDA. The company will retain ownership of ILEC assets in 16 other states, as well as its national fiber routes that run through the 20 states covered in the sale and its competitive local exchange carrier (CLEC) networks (see chart above).
"This transaction is an important step in our continued efforts to transform Lumen and drive future growth for our company," said Jeff Storey, Lumen president and CEO. "We are pleased with the attractive valuation we received for these assets, which highlights the overall value of Lumen's extensive asset portfolio. Apollo Funds will receive a great business with a strong customer base, dedicated employees, and a platform for future growth."
"The team at Lumen has built a great business and we see an incredible opportunity to provide leading edge, fiber-to-the-home broadband technology to millions of its business and residential customers," said Aaron Sobel, private equity partner at Apollo. "Our investment will help accelerate the upgrade to fiber-optic technologies, and we are excited to have such a high-caliber management team ready to bring faster and more reliable internet service to many rural markets traditionally underserved by broadband providers."
The deal with the Apollo Funds is the second asset sale agreement Lumen has announced in the last few weeks. The company recently revealed it plans to sell its Latin American operations to Stonepeak for $2.7 billion (see “Lumen agrees to sell Latin American business to Stonepeak” in BTR's sister site Lightwave).
