(Sharecast News) – Telefonica shares surged on Wednesday after the Spanish telecommunications company agreed to sell its telecommunications towers in Europe and Latin America to American Tower for 7.7bn in cash.
The deal will see Telefonica’s subsidiary, Telxius Telecom, hand over around 30,722 telecommunication towers.
Telefonica said that once the transaction is complete, the group’s net financial debt will be reduced by approximately 4.6bn and the leverage ratio by around 0.3 times.
“This operation is part of the Telefónica Group’s strategy, which includes, among other objectives, an active portfolio management policy of its businesses and assets, based on value creation and at the same time, accelerating the organic reduction of debt,” it said.
American Tower said it expects the assets to generate around $775m in property revenue, approximately $410m in gross margin, and around $390m in adjusted earnings before interest, tax, depreciation and amortisation at current foreign exchange rates, in their first full year in its portfolio, pro forma for contributions from the committed future build-to-suits.
The US company’s chief executive officer, Tom Bartlett, said: “This transaction is transformational for our European business and will establish American Tower as one of the largest independent communications infrastructure providers in Europe.
“It is also complementary for our Latin American portfolio and positions us to drive strong long-term organic growth across both regions while augmenting our new build programs and enhancing our relationships with key tenants. We are excited to broaden our partnership with Telefónica by acquiring a high-quality, well-located portfolio of sites that will further diversify our global footprint and enhance our ability to help provide broadband connectivity for billions of people.”
At 1000 GMT, Telefonica shares were up 9.2% at 3.93.