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Biggest U.S. ECM deal pushes activity towards US$200bn

On 2 June, American Tower launched a US$2.1bn stock sale that would rank as the largest equity-linked raise so far in 2022 and provide a large chunk of the tower REIT’s US$5bn-$5.5bn equity needed to help fund last year’s US$10.4bn acquisition of data centre owner CoreSite Realty.

After a day of marketing, a JP Morgan-led syndicate priced the follow-on sale of 8.35m shares or less than 2 percent of the wireless tower REIT at US$256.00, a 2.4 percent discount to last sale and a 1.4 percent file-to-offer premium.

American Tower shares were trading at US$267.25 early the following day.

“This shows the market has an appetite for scaled, stable businesses with an attractive growth platform,” a syndicate banker said.

“(American Tower) has strong institutional backing.”

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Citigroup, Mizuho, Morgan Stanley and TD Securities also acted as joint bookrunners.

The banks seem likely to exercise a 10 percent greenshoe option, which would increase the offering size to US$2.35bn. American Tower had said it planned to fund the already completed US$10.4bn acquisition of Coresite Realty with US$5bn-$5.5bn of equity.

Seeking third-party private capital

American Tower is now seeking US$2.5bn of third-party private capital to cover most of the balance of its equity need, helping to bring down its leverage ratio to the high 5-times region and maintain its investment-grade credit rating.

It did not reveal the name of the third party, though Canada’s Caisse de dépôt et placement du Québec stepped up last year to provide 30 percent of the equity check for American Tower’s US$9.4bn purchase of Telxius, the European tower unit of Spain’s Telefonica.

While the American Tower offering ranks as this year’s biggest stock sale in the United States, competition has been scarce in a lean year that has seen only four other equity or equity-linked offerings larger than US$1bn (follow-ons from Alexandria Real Estate Equities and Carvana, a CB from Snap, and the TPG IPO).

Global equity capital markets issuance totals US$194.7bn through 7 June, a 68 percent decrease from a year ago and the slowest period for new equity offerings since 2005.

Asia Pacific issuers account for 56 percent of issuance so far this year, while Americas offerings account for 21 percent and European issuers make up 13 percent of this year’s activity.

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Expensive diversification

American Tower is securing permanent funding more than five months after closing the CoreSite acquisition, a deal some analysts viewed as an expensive diversification exercise offering few synergies with the core tower business.

Companies more commonly secure permanent funding prior to closing such a big acquisition, as American Tower did when it raised US$2.4bn of equity in May last year before closing the Telxius purchase in June.

This article was originally published on as ‘American Tower secures US$2.14bn from year’s biggest U.S. ECM deal’ and has been edited for Refinitiv Perspectives.

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