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American Tower (AMT) Closes Telxius Towers' Buyout in Europe

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American Tower Corporation AMT has closed the first tranche of its previously-announced Telxius Towers acquisition for €6.2 billion (or $7.6 billion at current foreign currency exchange rates).

The first tranche comprised roughly 20,000 communications sites in Germany and Spain. Moreover, the company anticipates closing additional 4,000 rooftop communications sites in Germany in third-quarter 2021.

Markedly, in January 2021, American Tower entered definitive agreements with Spain’s Telefónica, S.A. for the acquisition of Telxius Towers, consisting of around 31,000 communications sites, spanning across Germany (roughly 12,500 existing sites), Spain (around 11,300 existing sites), Brazil, Chile, Peru and Argentina for €7.7 billion (or $9.4 billion at the date of signing).

In early May, the company announced a share offering to raise $2,147.1 million and the sale of a 30% stake in ATC Europe for more than €1.6 billion in a move to fund the buyout. With this, the company was able to fund the first trance by a combination of cash on hand and borrowings under its revolving credit facilities and term loans.

It expects the first tranche of assets to be immediately accretive to consolidated adjusted funds from operations (AFFO) per share, and generate around $280 million in property revenues and $145 million in gross margin for the remaining of 2021.

Management looks forward to rapidly integrate the newly acquired assets into its existing European portfolio that will place the company to support and benefit from accelerating 5G deployments in the region.

Along with the acquisition announced this January, the company had also made a commitment for the construction of additional towers. The expansion efforts will help it to scale its presence in Europe and become one of the largest independent communication infrastructure providers in the continent.

Also, this is in line with American Tower’s continued focus on macro-tower investment opportunities to gain scale in attractive global markets. In fact, the company has been ramping up its investments in the international business and strengthening the global footprint through acquisitions and constructions. In the first quarter of 2021, it spent approximately $115 million to acquire 116 communications sites, including 48 sites in the United States and 68 sites in Latin America.

Shares of this Zacks Rank #3 (Hold) have had an impressive run in the past three months, appreciating 27.4% compared with its industry's 14.5% growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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However, tower operations in the emerging markets are not as profitable as those in the mature U.S. market and this might affect American Tower’s bottom line. Moreover, elevated churn is a concern in certain emerging markets where the company operates.

Stocks to Consider

Industrial Logistics Properties Trust’s ILPT FFO per share estimate for the current year has moved marginally up to $1.88 in the past month. The company currently carries a Zacks Rank of 2 (Buy).

Mack-Cali Realty Corporation’s CLI Zacks Consensus Estimate for 2021 FFO per share has moved marginally north to 54 cents over the past week. The company currently carries a Zacks Rank of 2.

Braemar Hotels & Resorts Inc. BHR carries a Zacks Rank of 2 at present. The Zacks Consensus Estimate for the ongoing year’s FFO per share has been revised 37.5% upward in a month to 44 cents.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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