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Terms Agreed for Bidco to Buy UK FTTH Builder CityFibre for £538m

Tuesday, April 24th, 2018 (7:38 am) - Score 2,823

Fibre optic (FTTP/H) network builder Cityfibre has announced that they’ve agreed the terms of a recommended £537.8m cash acquisition by Connect Infrastructure Bidco Limited (Bidco), which is a newly-incorporated company that is jointly-owned by a consortium of two key infrastructure investors.

Over the past few years Cityfibre has made a name for itself by gradually deploying their Gigabit capable Fibre-to-the-Premises (FTTP) style broadband and Ethernet network to help cater for businesses and public sector sites in various cities across the United Kingdom (they’ll have a presence in 50 by 2020).

On top of that they also run a legacy 1Gbps FTTH network for homes in Bournemouth and have previously teamed up with Sky Broadband and TalkTalk on a major deployment across the city of York. More recently they’ve also signed a joint £500m deal with Vodafone UK that will initially aim to roll-out their ultrafast network to a “minimum” of 1 million homes in up to 12 of Cityfibre’s existing cities and towns by the end of 2021 (here).

So far the agreement with Vodafone, which after the first phase would have the “potential to extend” up to 5 million homes (approximately 50 towns and cities) by 2025, has already announced its first deployments for 3 UK cities: Milton Keynes, Aberdeen and Peterborough. Today these have also been joined by Edinburgh, Coventry, Huddersfield and Stirling but we’ll write about that separately (here).

However significantly more future investment would be required in order to deliver on the 5 million homes aspiration and that’s where today’s news could play a part.

The Cash Buy

The move by Bidco, which values the entire issued and to be issued ordinary share capital of Cityfibre at approximately £537.8 million on the basis of a fully diluted ordinary share capital of 663,912,902 Cityfibre Shares, essentially turns the operator back into a private company.

The Acquisition represents a premium of approximately:

* 92.9 per cent. to the Closing Price of 42 pence per CityFibre Share on 23 April 2018 (being the last Business Day before the date of this Announcement); and

* 47.3 per cent. to the Placing share price on 28 July 2017 of 55 pence per CityFibre Share.

Both Cityfibre’s directors and major shareholders have all lined up to support the proposed deal.

Chris Stone, Chairman of CityFibre, said:

“CityFibre has established itself as a leading independent provider of wholesale fibre infrastructure in the UK and has been on a transformational journey since its IPO in 2014. Your board believes that this transaction represents compelling value for CityFibre’s existing shareholders and is also a good solution for CityFibre’s long-term funding.

Under private ownership, CityFibre will be able to gain alternative and potentially easier access to the financing required for its announced FTTH deployment. This will strengthen the Company’s ability to deliver on its vision to provide full fibre infrastructure to 20% of the UK market.”

Mark Crosbie, Managing Partner of Antin, said:

“I am delighted to announce Antin’s intention to invest in CityFibre. We are very excited to support the company in its next phase of development as it becomes a leading alternative fibre-based communications provider in UK cities.

We have significant experience in investing and supporting infrastructure businesses in the telecom sector and we look forward to working with CityFibre’s management team to realise the full potential of their vision.”

We should point out that the new company of Bidco is indirectly jointly-owned on a 50:50 basis by Antin Infrastructure Partners (Antin) and West Street Infrastructure Partners (WSIP), which are two major european and USA infrastructure focused investment funds. Antin has raised €7.4 billion of capital since its inception and WSIP, which is managed by Goldman Sachs, claims to have raised over $163 billion of capital since 1986.

Separately Cityfibre has also published their latest financial results for the full year (FY) to the end of December 2017 and the key highlights are as follows.

Financial Highlights:

· Turnover increased 126%, to £34.8m (2016: £15.4m), of which £15.4m is attributable to the consolidation of Entanet’s results for the five month post acquisition period

· Gross profit increased 48.4% to £20.1m (2016: £13.5m), of which Entanet contributed £3.8m. Gross profit up £2.8m (21%), excluding the contribution from Entanet

· Gross margin of 57.8% (2016: 88.1%). Excluding the impact of Entanet, gross margin of 84.5%

· Adjusted EBITDA1 of £4.5m (2016: £2.5m)

· Initial Contract Value2 (‘ICV’) of £26.3m added in the period, with a further minimum volume commitment from Vodafone over the initial 10 year period expected to exceed £200m

· Net loss after tax increased to £16.6m (2016: £12.6m)

Operating Highlights:

· £201.8m fundraising to fund growth of the Group’s full fibre network and the acquisition of Entanet, a provider of wholesale fibre connectivity and communications services to business internet service providers

· Strategic partnership with Vodafone to deliver FTTP to up to 5 million homes by 2025

· Cumulative on-net connections sold (ex-FTTP and Entanet) up 27% versus 2016, to 9,204

· Cumulative on-net connections delivered (ex-FTTP and Entanet) up 26% versus 2016, to 4,975

· Entanet’s off-net leased lines estate up 14%, to 3,954 from 3,456 in 2016

· Total route kilometres of fibre infrastructure expanded to 3,740km [in over 40 UK cities], versus 3,383km in 2016

Post-Period Highlights:

· Milton Keynes, Aberdeen and Peterborough announced as the initial three FTTP cities under the first phase of the Vodafone partnership

· Construction underway in Milton Keynes, with Aberdeen and Peterborough in advanced planning phase

· Debt refinancing process progressing well, closing expected H2 2018

· Coventry, Edinburgh, Huddersfield and Stirling will be the next cities to benefit from the deployment of the full fibre broadband programme. The investment in these new cities, together with Milton Keynes, Aberdeen and Peterborough, will bring Vodafone and CityFibre’s FTTP roll-out above the half a million premises, and brings CityFibre’s committed infrastructure investment in the project to at least £315m.

Key operating metrics



Cumulative on-net connections sold (ex-FTTP)




Cumulative on-net connections delivered (ex-FTTP)




Total km of fibre infrastructure




Off-net leased lines sold by Entanet





The Group ended the year with 303 full-time equivalent staff (‘FTEs’), versus 143 as at the end of 2016. 108 employees were welcomed to the Group from Entanet on the acquisition date.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
Leave a Comment
5 Responses
  1. asrab uddin says:

    This should scare openreach a bit – having two major backers for FTTP by purchasing Cityfibre, it deems profitable surly they will accelerate the further FTTP deployments

  2. Tigger says:

    BT are focused on TV rights not fibre to the property

    1. Salek says:

      The new owners have deep pockets – and are no strangers to infrastructure roll out, along with with less regulatory restrictions and easier access to more funding than Openreach,

      I would say its time for BT-Openreach to rethink their priorities,

  3. Fastman says:

    more disinformation as ever I see Tigger

  4. ilikehaggis says:

    Living in aberdeen right now

    i’m really hoping voda start announcing prices soon.

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