Morrison & Co inks first US digital infra deal

The NZ-based manager has led a consortium to acquire FiberLight, with head of North America Perry Offutt telling us its perpetual capital should help grow the business faster.

New Zealand-based Morrison & Co has led a consortium to acquire US fibre infrastructure provider FiberLight for a reported $1 billion, marking the firm’s first investment in the North American digital infrastructure market.

Morrison’s head of North America, Perry Offutt, told Infrastructure Investor that the firm’s investment in Atlanta-headquartered FiberLight would be made through its global infrastructure fund, the open-end Morrison & Co Infrastructure Partnership.

Consisting of 18,000 route miles of fibre infrastructure, the FiberLight network covers 30 metropolitan areas across states including Texas and Virginia. Following its acquisition from private equity investor Thermo Companies, the firm plans to accelerate the network’s expansion, as it continues to build out its presence in US markets.

“When you look at the fibre space in the US, there are a lot of very sub-scale businesses in our mind that had potential, but were something we [were] less excited about,” Offutt said. “Our first attraction [to FiberLight] was the fact that it’s an established platform and is already of a scale that we could build [on]. To be able to start with real scale was a focal point for us and when you look through the market, there are just not many of those opportunities.”

The consortium behind the acquisition also comprises Australian Retirement Trust and a managed client of UBS Asset Management, reported to be the California State Teachers’ Retirement System. Offutt declined to comment on the identity of the UBS client. He did, however, say both investors in the consortium alongside Morrison represented, like the firm’s open-end IP fund, perpetual capital, offering a long-term horizon that could better harness the sector’s growth trends.

“[Being able to hold the asset for the long-term] has unlocked, immediately, a lot of value because the business has [previously] always had to think about shorter-term paybacks,” Offutt explained.

“Thinking about [what constitutes] a net present value positive project, given [our] longer time horizon and our hurdle rates, [we] might actually be able to invest more capital and grow [faster],” Offutt said. “If you’re private equity capital and you’re focused on shorter paybacks and a hurdle rate that’s much higher, you’re going to end up investing less capital.

“We believe we can take the exact same platform, grow it [faster than before] and make very attractive returns, just by [having] a much longer time horizon.”

Digital infrastructure will continue to be a focus for the firm in the US market, as will opportunities in the renewable energy sector, Offutt added.

Since opening its New York office last year, the firm has built a team of 10 investment professionals in the country, including chief investment officer William Smales who is head of the firm’s digital practice globally. Smales led a Morrison-managed consortium in the A$2.8 billion ($1.9 billion; €1.9 billion) acquisition of 49 percent of Telstra’s InfraCo Towers last year.

In May, the firm accelerated its global expansion with a new partnership model seeing 14 partners appointed across Asia-Pacific, Europe and the US. At the time, partner Nicole Walker told Infrastructure Investor that the firm was likely to begin raising further capital for its IP fund and commence fundraising for the second vintage of its core-plus focused Morrison & Co Growth Infrastructure Fund before the end of the year.