Completion of £300 million investment in Arqiva

RNS Number : 3389D

Digital 9 Infrastructure PLC

19 October 2022

 

19 October 2022

DIGITAL 9 INFRASTRUCTURE PLC

("DGI9", "D9", the "Company" or, together with its subsidiaries, the "Group")

Completion of £300 million investment¹ in Arqiva

Further to the Company's announcement on 27 June 2022, Digital 9 Infrastructure plc (ticker: DGI9), a leading investor in the infrastructure of the internet, is pleased to announce that it has completed the acquisition of a 51.76%² economic stake in Arqiva Group Limited ("Arqiva"), a UK-based data, network, and communications service provider (the "Acquisition"). Arqiva is the leading UK provider of TV and radio broadcasting and benefits from a strong Internet of Things ("IoT") platform. We are excited for the opportunity to grow Arqiva's existing national IoT platform, while benefiting from its underlying regulated cashflow.

Between the original announcement and completion of the Acquisition, Arqiva has successfully refinanced a £625 million junior bond (due to mature in September 2023), using existing cash resources and a new £450 million term loan, repayment of which is due in March 2028. As of today, Arqiva benefits from a stable capital structure with only 13% of Arqiva's debt needing to be refinanced in the next 5 years, all of which is BBB rated³.

Investment Rationale

The Acquisition complements D9's portfolio with:

1)  High revenue visibility and operational cash flow underpinned by:

a.  Significant and highly stable Sterling-denominated cash flow generation, including a base of cash flow from a significant regulated and long-term asset business.

b.   A weighted average contract length of c.8 years with inflation protection against 69% of the revenues Arqiva generates.⁴

c.    Long-established customer relationships, and a high quality, blue-chip customer base including the BBC, ITV, Discovery, BT Sport and Sky.

2)  A proprietary wireless connectivity platform with an attractive and growing national IoT installed base, providing connectivity for utilities and enterprise through an exclusive 412 MHz spectrum, connecting over 15 million business and consumer premises.

The investment in Arqiva supports D9's investment purpose which aligns to United Nations Sustainable Development Goal #9, specifically:

· Enabling connectivity to those unable to access or afford modern internet access; Arqiva is the only means by which just under 8 million adults access television content. Included in this group are some of the most vulnerable in society; 3 million of these people live alone, 4 million belong to the C2DE socio-economic group, and nearly 1.8 million have a disability.⁵

· Ensuring a more efficient use of natural resources through the Arqiva IoT and connectivity platform. Arqiva's national terrestrial television platform is c.5 times more energy efficient than an equivalent IPTV service⁶. In addition, Arqiva's IoT connectivity private network infrastructure enables business and customers to manage energy and water resources with less wastage.

Portfolio Composition

Following the investment in Arqiva, D9's underlying portfolio will have a weighted average contract length of 7.7 years, with 69% of revenues having some form of inflation protection and an aggregate EBITDA of £223m⁷.

Phil Jordan, Chair of Digital 9 Infrastructure plc, commented:

"Arqiva provides D9 with access to highly resilient, long-term, and inflation-linked cash flows and further diversifies our portfolio into wireless networks. Together, D9 has built a portfolio of scalable platforms and technologies in digital infrastructure, the user demand for which will continue to grow through the economic cycle. D9 looks forward to supporting Arqiva in its next phase of growth, delivering its obligations as a national broadcasting service and helping enable its smart metering and connectivity solutions."

ENDS.

Notes:

¹ £300m cash consideration with an additional £163m acquisition financing (Canadian Pension Plan Investment Board vendor loan note; non-recourse to DGI9; adjusted based on future crystallisation events).

2 The interests being acquired include a shareholder loan which results in a 51.76% economic stake at the current valuation levels.  DGI9 is acquiring a 48.02% equity in Arqiva.

³ Based on Arqiva's 2021 financial accounts, D9 acquisition financing, and internal calculations.

⁴ From core contracts that represent 73% of forecasted revenues in FY22.

⁵ Hind, G., Harrington, T. and Standen-Jewell, T., 2022. BBC and subscription. Impractical and not inclusive. Enders | Analysis, p.2.; C2DE as defined in the NRS social grades classification.

⁶ The LoCaT Project, Sep-2021, Quantitative study of the GHG emissions of delivering TV content | Analysis on page 2, showing Wh per device viewing hour in the UK.

⁷ Represents LTM to 30 June 2022 EBITDA for subsea and Host, FY21 reported EBITDA for Arqiva (proforma for ownership), and run rate EBITDA as at 30 June 2022 for data centres (including Ficolo Oy).

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

Triple Point Investment Management LLP (Investment Manager)	[phone]
Thor Johnsen / Arnaud Jaguin / Jack McWhinnie
Rothschild & Co (M&A Adviser)	[phone]
Ali Kazmi / Alice Maynell / Nitant Gupta
J.P. Morgan Cazenove (Corporate Broker)	[phone]
William Simmonds / Jérémie Birnbaum (Corporate Finance)
James Bouverat / Liam MacDonald-Raggett (Sales)
FTI Consulting (Communications Adviser)
Mitch Barltrop	[phone]
Gina Magnin	[phone]

LEI: 213800OQLX64UNS38U92

NOTES TO EDITORS

Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the London Stock Exchange with ticker DGI9. The Company invests in the infrastructure of the internet that underpins the world's digital economy: digital infrastructure.

The number 9 in Digital 9 Infrastructure comes from the UN Sustainable Development Goal 9, which focuses the fund on investments that increase connectivity globally and improve the sustainability of digital infrastructure. The assets DGI9 invests in typically comprise scalable platforms and technologies including (but not limited to) subsea fibre, data centres, terrestrial fibre and wireless networks.

From its IPO in March 2021 and subsequent capital raises, DGI9 has raised total equity of £905 million and a revolving credit facility of £375 million, invested into the following data centres, subsea fibre, and wireless networks:

· Aqua Comms, a leading owner and operator of 20,000km of the most modern subsea fibre systems - the backbone of the internet - with a customer base comprising global tech and global telecommunications carriers (April 2021);

·   Verne Global, the leading Icelandic data centre platform, with 40MW of high intensity computing solutions in operation or development, powered by 100% baseload renewable power (September 2021);

·   EMIC-1, a partnership with Meta on a 10,000km fibre system from Europe to India (July 2021);

· SeaEdge UK1, a data centre and landing station for the North Sea Connect subsea cable, part of the North Atlantic Loop subsea network, improving connectivity between the UK, Ireland, Scandinavia and North America (December 2021);

·  Host Ireland, a leading enterprise broadband provider that owns and operates Fixed Wireless Access networks (April 2022);

· Volta, a premier data centre based in central London, providing 6MW retail co-location services (April 2022);

·   Ficolo, a leading Finnish data centre and cloud infrastructure platform, with c.23MW of data centre capacity, powered by 100% renewable power and distributing surplus heat to district heating networks (July 2022); and

· Arqiva, the only UK national terrestrial television and radio broadcasting network in the United Kingdom - providing data, network and communications services, as well as a national IoT connectivity platform (October 2022).

The Investment Manager is Triple Point Investment Management LLP ("Triple Point") which is authorised and regulated by the Financial Conduct Authority, with extensive experience in infrastructure, real estate and private credit, while keeping ESG principles central to its business mission. Triple Point's Digital Infrastructure team has over US$ 300 billion in digital infrastructure transaction experience and in-depth relationships across global tech and global telecoms companies. For more information, please visit www.triplepoint.co.uk.

The Company's Ordinary Shares were admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange on 31 March 2021. It was admitted to the premium listing segment of the Official List of the Financial Conduct Authority and migrated to trading on the premium segment of the Main Market on 30 August 2022.  For more information, please visit www.d9infrastructure.com.

 

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