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- Digital 9 Infrastructure sells Verne Global and announces strategic review
Digital 9 Infrastructure (DGI9) has announced that it has entered into a definitive agreement to sell its entire stake in the Verne Global group to funds managed or advised by Ardian France SA for up to US$575m (approximately £456m). The sale price has deferred and contingent elements as explained below. There are also a number of conditions to be met if the sale is to proceed. The sale is the result of a competitive process which sought to maximise shareholder value and, assuming it proceeds, the sale will allow DGI9 to pay down its revolving credit facility (RCF) and deleverage its balance sheet by approximately £300m. Ardian is a private investment house, managing or advising $156bn of assets on behalf of more than 1,470 clients globally. It is a leading investor in digital infrastructure, with investments across the full value chain including mobile and fixed infrastructure networks.
The sale price for Verne Global is comprised of:
The sale is conditional on:
Since its acquisition, Verne Global has generated sustained and accelerated customer demand for its facilities from both new and existing customers and has an EBITDA of £13.5m for the last 12 months ending 30 June 2023. As a result, DGI9 received interest in Verne Global from a significant number of investors during the competitive sale process. In fact, DGI9 received several non-binding offers for a majority stake in Verne Global that were more attractive than the indicative offers received for the syndication of a minority stake in Verne Global initiated in March 2023. In consultation with its financial advisor, DGI9’s Board concluded that a sale of the entire stake in Verne Global was in shareholders’ best interests because it provided an opportunity for the Company to repay a significant part of DGI9’s RCF and deleverage its balance sheet.
The Initial Purchase Price payable on closing is intended to be used to pay down approximately £300m of the RCF. The full amount of this initial repayment could be delayed in the event that certain indemnification provisions are not replaced by insurance in the period before closing of the Verne Transaction.
Pending receipt of the Purchase Price, DGI9 says that it will seek to secure a financing solution to fund Verne Global through to closing of the Verne Transaction. DGI9 is also developing a plan to address its residual financial uncertainty (as disclosed in the Interim Results for the period ended 30 June 2023) pending receipt of funds from the Verne Global sale.
Following the announcement of the sale of Verne Global, DGUI9’s board says that it is initiating a strategic review “to develop a set of actions with a view to maximising shareholder value going forward”. It has taken financial and legal advice and believes that initiating a strategic review prior to signing a definitive agreement for the Verne Transaction could have undermined the sale process.
The board says that the strategic review will develop and assess the options for the Company’s portfolio companies with a view to maximising shareholder value going forward. For the avoidance of doubt, any proposal involving the sale of the Company’s assets or otherwise will exclude Verne Global, following the announcement today of the Verne Transaction.
As part of the Strategic Review, the Board will review the management arrangements (including performance and the fee structure) of the Company’s investment manager, Triple Point Investment Management LLP.
“The Board has sought to maximise shareholder value from the Company’s ownership and development of Verne Global and in doing so, help to strengthen DGI9’s financial position and cash resources. Having reached this milestone, the Board will maintain oversight of DGI9’s portfolio and together with our advisers, engage with DGI9’s portfolio companies in conducting the Strategic Review. The Board is committed to expediting the Strategic Review and will report its progress to shareholders in due course.”
In anticipation of corporate activity that may result from the Strategic Review, DGI9’s board says that it intends to review the skills and composition of the Board to support DGI9 going forward. The Board will appoint a recruitment consultant to conduct an independent external recruitment process to identify non-executive board director candidates with executive corporate finance and M&A credentials as well as other skills that may be required to support the outcomes of the Strategic Review.
[QD comment: Verne Global has been a key asset for DGI9 and so it is understandable that the company wanted to retain control of it but, in the end, the board believed that a full sale extracts a lot more value for shareholders and crucially allows it to pay down its £375m revolving credit facility, which expires in March 2025.
The potential inability to repay this debt when it falls due has been a significant concern. However, a full sale of Verne Global allows it to address that. In addition, as it was growing quickly, Verne Global was going to need considerable capital investment to fund its expansion plans; the growth capital expenditure pipeline for the Verne Global companies increased from £493m reported in January 2023 to £610m in September 2023, and other assets will also require additional funding.
We have to say that the sale price achieved for Verne is disappointing. £456m, and much of that not due for some years and subject to performance, compares to an end June valuation of £480m (signed off by the board in September). Nevertheless, DGI9 is in a better shape than it was.]
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