Dealwatch: Hyperlinks and Goodwin achieve bandwidth on $ 2 billion telecommunications firm spin-off as Eversheds and DLA take pleasure in Connoisseur Burger Kitchen rescue
The deal market continues to be a product of the coronavirus environment, with Gourmet Burger Kitchen’s rescue buy dominating the headlines as the pandemic ravages the UK’s main street.
I Squared Capital’s acquisition of GTT Communications’ $ 2 billion infrastructure business is the latest example of the appeal of telecommunications assets at a time when connectivity is more important than ever.
Under the deal, GTT will sell its infrastructure business, which consists of European, North American, subsea and transatlantic fiber optic network and data center facilities, to a fund managed by I Squared Capital for $ 2.15 billion.
The sale includes select network and data center resources resulting from multiple GTT acquisitions including Interoute, Hibernia and KPN International. This includes a 103,000-kilometer fiber-optic network with over 400 points of presence that includes 31 subway areas and connects 103 cities across Europe and North America.
Three transatlantic subsea cables, including GTT Express, the lowest latency route between Europe and North America, as well as fourteen Tier 3 data centers and more than 100 co-location facilities are also part of the contract.
It builds on similar deals in this area, where Orange recently started a sales process for a 50% stake in its fiber optic network Orange Concessions. Last year, the Covage network was sold to Altice for 1 billion euros, selling 28 times its EBITDA.
This month EQT Infrastructure V signed an agreement to acquire a 12% stake in Deutsche Glasfaser from its sister vehicle EQT Infrastructure IV, which the company bought together with the Canadian pension fund OMERS in February 2020.
Goodwin’s private equity team, which advises long-term client GTT, was led by Gemma Roberts and also included partner Gretchen Scott.
Speaking to Legal Business, Roberts pointed to an active technology and growth capital market where fast-growing companies need liquidity.
‘Telecommunications as an industry is relatively covid-resistant – its global presence is fairly sheltered as it provides vital infrastructure for every household and country. Ed-Tech and Med-Tech are the types of companies that thrive and operate in such a world where companies are finding new ways to access their customers. ‘
Roberts said the deal was complicated by the fact that GTT was a global company deeply anchored in every jurisdiction. ‘Carving out the infrastructure business meant that it had to be taken out of the existing business and seamlessly pulled out to keep the rest of the business intact. Then you can be really useful as a legal advisor to the client, ”she said.
Commenting on the deal market in general, Roberts added, ‘We will see more companies go through carve-outs to free up capital, realign the business and downsize non-core businesses. Companies will wonder where to go next, sell non-core parts of the business, and focus on the most focused and best structure for the future. ‘
Linklaters advised I Squared Capital with a team led by partner Will Aitken-Davies, which also included tax partner Chris Smale, TMT / IP partners Marly Didzian and Nemone Franks.
Aitken-Davies told Legal Business: ‘The digital infrastructure has been very active and quite robust due to Covid-19 and lockdown. It makes sense – with so many people working from home – that bandwidth is more important than ever. It’s also exciting because this is the seed capital for I Squared’s third infrastructure fund. ‘
Latham & Watkins worked on the debt side for I Squared, with a team led by Conrad Andersen.
I Squared completed a $ 3 billion fundraiser for the ISQ Global Infrastructure Fund in 2013 and raised $ 7 billion for the ISQ Global Infrastructure Fund II in 2017.
Eversheds Sutherland and DLA Piper have taken on roles elsewhere in Covid-powered stores when the Boparan Restaurant Group (BRG) took over the management of the Gourmet Burger Kitchen (GBK) restaurant chain.
GBK, which has locations in the UK and Ireland, operates on a reduced basis due to the Covid-19 lockdown restrictions. The transaction was facilitated by a pre-pack administration, which secured a “go forward” portfolio of 35 locations and 669 jobs.
However, under the deal, 26 more restaurants across the UK will be closed and 362 jobs will be lost. Boparan also bought Carluccio’s restaurant business advised by Eversheds in May and owns other brands such as Cinnamon, Fishworks, Slim Chickens, Giraffe and Ed’s Easy Diner.
The Eversheds restructuring team advising the buyer was led by partner Jenna Poulton, while DLA’s James Davison served as joint administrators for Deloitte.
Commented, Poulton noted, “The challenges facing retail, hospitality and the casual hospitality industry were well documented prior to the Covid-19 pandemic and were only exacerbated by it. Expansion of state support through prohibitions on forfeiture and the issuing of legal claims as well as processing petitions by the end of the year. Temporary solutions that are helpful in the long term, however, do not concern over-rented and below-average real estate portfolios in the entire industry. ‘
In the broader restructuring market, Poulton added: ‘As with GBK, we expect more prepackaged administration sales to be used in this sector as alternative long-term restructuring solutions. This remains an important tool to save companies and maintain values.
“After the government’s recent announcement on October 8th that an independent, mandatory review of all prepackaged sales to related parties will now be required, time will tell if this will reduce the value and market appetite for this important restructuring tool.”