Telefónica has reached an agreement with global investment firm KKR Group for the sale of up to 40% of Telxius Telecom, its global telecommunications infrastructure company.

Telefónica has sold the stake for a total amount of €1.275 billion (US$1.343 billion), or €12.75 (US$13.43) a share.

Under the agreement, which is subject to regulatory approvals, Telefónica and KKR will partner together to develop and grow one of the global operators of telecom infrastructure including the development of planned new infrastructures.

Telxius owns and operates a large portfolio of nearly 16,000 telecommunications towers in five countries. It also manages an international network with approximately 65,000 kilometers of submarine fibre optic cables, of which around 31,000 kilometers are owned by Telxius. Both business units benefit from attractive growth in their core markets, as the use of mobile data and the demand for reliable internet connectivity continue to grow rapidly, particularly in Spain and Latin America.

Following the deal, Telefonica will remain the anchor client for Telxius’ tower and cable businesses. It will keep a majority stake and operational control of Telxius and continue to consolidate it into its accounts. The sale is part of Telefonica’s strategy to optimize its asset portfolio and allocation of capital, and complements its plan for organic debt reduction.

The deal implies an enterprise value of €3.678 billion (US$3.874 billion) for Telxius. The agreement confirms the valuation established for Telxius in the offering memorandum for its attempted Initial Public Offering. At that time, the indicative price range for the same stake was between €12-€15 (US$12.6-US$15.8) per share. The transaction values Telxius’s equity at €3.188 billion (US$3.358 billion), €12.75 (US$13.43) a share.

The agreement includes the initial acquisition by KKR of 62 million of shares (24.8% of the total shares) of Telxius for a total amount of €790 million (US$832 million), as well as the option to acquire and sell an additional 38 million shares (15.2% of the total shares) for an amount of at least €485 million (US$511 million). Such options are related to a call option, exercisable by KKR and a put option, exercisable by Telefónica upon maturity of the call option.

Guillermo Ansaldo, chairman of Telxius said:

“Our vision for Telxius is to capitalize on the exponential increase in data traffic forecast for the coming years by offering a first-class network in Europe and the Americas.  We are delighted to have KKR on board as a long-term investment partner. We believe their solid track-record on the infrastructure business will help us achieving our common goals”.

Jesus Olmos, Member & Global Co-Head of Infrastructure and Head of Spain at KKR, said:

"The combination of Telefonica's industrial expertise and KKR's financial and operational support will help Telxius as it continues to scale and grow. We are confident that the exploding demand for mobile data, driven by the rise in 4k and virtual reality content, together with the need for reliable internet infrastructure will help drive strong growth in the business."