TORONTO – The incoming CEO of Rogers Communications, a former Rogers CEO, and the founder of Wind Mobile in Canada are all now investors in a wireless company looking for growth in Bolivia and New Zealand.
In a press release today, Alignvest Acquisition Corporation (AQX) and Trilogy International Partners LLC have announced a proposed acquisition where the two combine.
Trilogy, based in Bellevue, Washington, was formed in 2005 as a privately held wireless telecommunications operator and provides communications services through its operating subsidiaries, 2degrees and NuevaTel (which operates under the brand Viva), in New Zealand and Bolivia, respectively.
2degrees and NuevaTel provide a variety of wireless voice and data communications services, both on a prepaid and postpaid basis, and their networks support several digital technologies including Global System for Mobile Communications (GSM or 2G); High Speed Packet Access, Universal Mobile Telecommunication Service, a GSM-based third generation mobile service for mobile communications networks (3G); and Long Term Evolution (LTE), a widely deployed fourth generation service (4G).
Toronto-based Alignvest Acquisition “is a special purpose acquisition corporation formed for the purpose of effecting an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, share exchange, asset acquisition, share purchase, reorganization or any similar business combination involving Alignvest Acquisition, also referred to as its qualifying acquisition,” according to the company. It’s chairman is former Rogers Communications CEO Nadir Mohamed.
It has raised $202 million since its 2015 IPO.
Trilogy is led by John Stanton (chairman) and Brad Horwitz (CEO), who have played leading roles in the creation and operation of several large wireless operators including Western Wireless, T-Mobile USA (formerly VoiceStream), McCaw Cellular, and Clearwire. The Trilogy management team is rolling 100% of their equity interest in this transaction, investing an additional US$5 million, and will own over 20% of the equity of the pro forma company
Besides Mohamed, and Trilogy’s management, additional wireless expertise will come from Anthony Lacavera (chairman of Globalive Capital and co-founder and CEO of Wind Mobile), and Joe Natale (soon-to-be-president and CEO of Rogers Communications, and former president and CEO of Telus), who will both be investors and/or serve on the board of the combined company.
The transaction is conditioned on a minimum cash requirement of US$135 million, gross of transaction fees, of which US$61 million has already been committed says the press release. Globalive Capital has invested $40 million in the transaction.
Proceeds will be used to de-lever Trilogy's balance sheet and position it for continued growth organically and through acquisition
Completion of the transaction is expected in Q1 2017, subject to certain approvals. AQX has agreed to invest its cash at closing for up to a 51% equity interest (and a 100% voting interest) in Trilogy.
Trilogy is expected to own 71.5% of NuevaTel and a minimum 62.9% interest in 2degrees. If other 2degrees shareholders decide to participate in the transaction in exchange for AQX common shares before AQX files its prospectus with the Ontario Securities Commission, or Trilogy converts its existing convertible notes for additional 2degrees shares on advantageous terms, appropriate adjustments are expected to be made to the transaction.
“Based on Trilogy's expected 2017 adjusted EBITDA of US$120 million (reflecting its ownership interest in NuevaTel and 2degrees), which is an increase of 18% from expected 2016 Adjusted EBITDA of US$101 million, our aggregate transaction value of US$875 million represents a 7.3x enterprise value / Adjusted EBITDA multiple,” says the release.
“AQX/Trilogy believe that each of 2degrees and NuevaTel occupy favorable positions within their respective markets. Each operates in an attractive, stable three player market; has meaningful market share; is poised to benefit from the switch from voice to data usage; has the opportunity to grow through ancillary businesses; has demonstrated significant profitability; is benefitting from recent capital investments; and owns its own infrastructure,” it continues.
“Trilogy management believes both its New Zealand and Bolivian subsidiaries will deliver substantial growth over the coming years. In New Zealand, this growth is expected to come from (i) continued market share and postpaid subscriber growth, (ii) expanded bundled solutions to target the previously underserved business segment, and (iii) cross-selling fixed solutions to the existing mobile subscriber base. In Bolivia, this growth is expected to come from (i) increased LTE adoption among the country's population, (ii) increased data usage amongst the existing subscriber base, and (iii) continued LTE overlay expansion. In addition to this organic growth, the Trilogy management team is highly experienced in international wireless acquisitions, and they believe that there are a number of potentially attractive, synergistic acquisitions available for Trilogy.”
“AQX/Trilogy intends to build a pre-eminent global telecommunications provider with sufficient resources and capital to continue delivering on its stated growth strategy. We believe the company will provide investors with an attractive investment opportunity.”
