Deals

Whitehelm makes £80m smart city investment outside dedicated fund

The firm has taken a ‘sizeable minority position’ in UK-based Connexin and could use it as a platform for further growth in this sector.

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Whitehelm Capital has made an initial investment worth £80 million ($103.3 million; €87.5 million) to buy a minority share in UK-based smart city group Connexin.

The European manager declined to disclose the size of the stake, although head of business development Tom Maher told Infrastructure Investor it had acquired a “sizeable minority position” and could be increased as it deploys more capital.

“We’ve got significant capital to deploy in this space across funds and co-investors and the opportunity here is both organic growth and a platform for consolidation,” Maher explained. “In digital infrastructure and smart cities, you’re seeing regional fibre networks being developed and regional IoT [internet of things] solutions being developed and I think we have a management team and a company that is at the forefront of those areas, particularly in Hull but generally in the north of the UK.”

While Whitehelm established the world’s first smart city infrastructure fund in 2018 alongside APG, the deal is being made outside the dedicated vehicle. Maher declined to disclose which fund it has been executed from, although it is believed to have originated from its maiden equity fund it began raising last year with a target of €1 billion.

“This was an opportunity for a different pool of capital with a slightly different business focus,” said Maher. “The company does a lot of smart cities, but there’s things like the fixed wireless access and the fibre business that are of the more traditional elements of infrastructure. This fitted into a different pool sensibly.”

Connexin designs and operates smart city solutions, primarily in its northern England base in Hull, where it has built the first purpose-built smart city in the UK. It has also developed ties with other city councils to build similar solutions, as well as its broadband business streams.

“The fixed wireless business has shorter term contracts in general but you see very sticky customers,” added Maher. When working with municipalities on the IoT side, procurement usually involves a combination of longer and shorter-term contracts, but even the latter “you expect to see continue year on year”, he explained.