Arqiva opts for £1.5bn IPO after direct sale called off

UK-based telecoms group Arqiva plans to raise £1.5 billion ($2 billion; €1.7 billion) through an IPO after a move for a direct sale failed to materialise.

The company expects to float at least 25 percent through a primary share offer, providing it with a valuation of about £6 billion.

Arqiva said its existing shareholders – Canada Pension Plan Investment Board (48 percent), Macquarie European Infrastructure Fund II (25 percent), IFM Global Infrastructure Fund (14.8 percent), First State Super (5.4 percent), MTAA Super (5.2 percent) and two Macquarie-affiliated minorities (1.5 percent) – will only sell shares through a 15 percent over-allotment option.

Discussions have been held within Arqiva for at least 18 months about whether the firm should be sold directly or on the stock market, Infrastructure Investor understands – with some industry insiders saying a float should have occurred earlier.

However, a decision to sell privately was taken at the beginning of this year after CPPIB renounced its pre-emption rights on Macquarie’s stake. Despite reported interest from GIC and Brookfield, Arqiva has been unable to reach an agreement with any potential suitors.

The group’s revenues grew 6 percent to £941 million in the full year to June 2017, with an 11 percent increase in EBITDA to £474 million. However, it recorded a loss for the period of £413.4 million after non-cash charges, which Arqiva said was principally due to adverse fair value movements recorded from the company’s swaps.

In addition to the £2.5 billion of senior net debt held by Arqiva, it holds outstanding swaps valued at close to £1.2 billion. Infrastructure Investor understands the structure of the swaps made it more difficult for the shareholders to secure a sufficiently attractive private deal.

In its statement to the London Stock Exchange, Arqiva said the IPO will “enable the group to restructure its swaps portfolio with the remaining proceeds to a level it believes to be appropriate for a public company which the group aims to complete within three months from admission”.

Arqiva says it owns about 16,000 TV, radio and mobile phone masts, with 98.5 percent of the UK watching TV via its networks, while it has also branched out to smart-meter installations and expects its network to cover up to 12 million premises in the UK once rollout is completed.