American Tower has agreed a multi-billion-dollar deal for a sizeable chunk of its nascent data centre business in the US, bringing in investment firm Stonepeak to help finance future growth.

The company, whose core business is mobile towers, has been building up its data centre portfolio in recent years. It has now brokered a deal to offload a stake of around 29% to Stonepeak for $2.5 billion, a sum that values the business as a whole at $10.5 billion. Stonepeak will serve as a financial partner, with certain governance rights, while American Tower retains day-to-day operational control.

Stonepeak gets a slice of the potentially lucrative 5G action and related growth in edge compute, and American Tower gets to shore up its finances. Or as the companies put it in their official announcement: “The transaction will position American Tower and Stonepeak to mutually benefit from the demand for low-latency, hybrid IT solutions and agile interconnection across the platform’s data center campuses, which are strategically located in key US metro areas.” That platform comprises 27 data centres in 10 markets, more than 450 networks, 23 native cloud on-ramps and over 35,000 interconnections.

The deal comes in the wake of the completion of American Tower’s acquisition of US data centre operator CoreSite late last year. The total cost of that deal, including repayment or assumption of CoreSite’s debt, came in at $10.1 billion. That’s a fair chunk of change for a company with annual revenues of between $600 million and $700 million (based on full-year 2020 figures and annualised Q3 2021 numbers), but that serves to demonstrate the extent of the growth opportunity here. According to American Tower, CoreSite averaged double-digit annual revenue growth for the five years leading up to the acquisition, as well as boasting an “attractive” development pipeline in the US and bringing the possibility of international expansion.

American Tower closed the deal in December, financing the completion through borrowings under its revolving credit facilities and term loans.

It is perhaps no surprise then that American Tower is seeking to shift some of the financial burden to a new investment partner, particularly with future prospects looming that will also require deep pockets to capture.

“While this transaction supports the equity financing component for our previously completed CoreSite acquisition, it also creates a platform through which growth opportunities can be strategically evaluated and financed, with American Tower and Stonepeak committed to executing on opportunities as the 5G ecosystem continues to develop,” said American Tower chief executive Tom Bartlett.

That comment suggests American Tower is looking at both organic and inorganic growth in the data centres space; given that the firm has largely built its data centres business through acquisition, more deals are not out of the question.

“American Tower has established one of the premier network dense, interconnection-focused data center platforms in the US through CoreSite and previous acquisitions, which we view as a great fit for our core infrastructure strategy,” said Andrew Thomas, Managing Director and Co-Head of Communications at Stonepeak. The investor’s North American portfolio includes Astound Broadband, Xplornet and Vertical Bridge; it has bought into EU Networks and Delta Fiber in Europe; and has been named as a possible buyer for Deutsche Telekom’s towers portfolio.

“The platform is strategically positioned to be at the forefront of the continued shift from a traditional centralized infrastructure model to a cloud-based, connected and distributed digital infrastructure model and we are excited to partner with the American Tower team to help accelerate investment behind this trend in the years to come,” Thomas said.

Indeed. There is money to be made in this sector, but there is also hefty investment required. Specialist investors are starting to really come into their own.

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