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American Tower (AMT) Stock Up on InSite Wireless Buyout Deal

American Tower Corporation AMT recently entered into a deal to acquire InSite Wireless Group, LLC. that owns, operates and manages around 3,000 communications sites, mainly in the United States and Canada for a total price of $3.5 billion.

Expected to close by the end of 2020, subject to customary closing norms, the transaction is expected to be immediately accretive to American Tower’s consolidated adjusted funds from operations (AFFO) per share.

Shares of American Tower were up 0.93% during Friday’s regular session.

The move seems a strategic fit as it will not only represent the company’s entry into Canada, but also boost its U.S. business by adding a high-quality, complementary, macro-tower focused portfolio.

InSite’s portfolio includes more than 1,400 owned towers in the United States and more than 200 owned towers in Canada. Also, the portfolio comprises roughly 70 distributed antenna system (“DAS”) networks in the United States. Apart from these, InSite controls more than 600 land parcels under communications sites and around 400 rooftop sites.

“We believe that these assets are positioned to enhance our organic growth and cash flow trajectory in the future as 5G deployments accelerate and densification initiatives progress,” stated Tom Bartlett, American Tower’s chief executive officer.

In their first full year in its portfolio, the assets are projected to generate roughly $150 million in property revenues and around $115 million in gross margin, per management. The company also noted that the transaction’s financing will be made in tandem with its investment grade credit ratings. Notably, the total consideration for the transaction includes cash acquired and the company’s assumption and/or repayment of InSite debt at closing.

Remarkably, wireless carriers are increasingly investing in 5G upgrades and 4G network densification as mobile-data usage grows. This is propelling demand for tower space, supporting American Tower’s leasing activity. The company has a resilient business model, providing a safer harbor amid the current global uncertainty. Also, decent liquidity and prudent capital-allocation strategy bode well.

The company is, in fact, ramping up its investments in the international business and strengthening the global footprint through acquisitions. During the third quarter, American Tower spent around $101 million to acquire 305 communication sites primarily in international markets. Also, during the second quarter, the company spent around $128 million to acquire 350 communications sites mainly in international markets. Such a diversified asset base positions American Tower to leverage on secular trends in mobile data usage growth across the globe.

Shares of this Zacks Rank #3 (Hold) company have appreciated 5.4% so far in the year, while its industry has declined 8.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Alpine Income Property Trust, Inc.’s PINE funds from operations (FFO) per share estimates for 2020 have been revised upward by 1.7% to $1.21 over the past month. The company carries a Zacks Rank of 2 (Buy), currently.

Extra Space Storage Inc.’s EXR Zacks Consensus Estimate for 2020 FFO per share has moved marginally up to $4.98 over the past week. The company currently carries a Zacks Rank of 2.

Life Storage, Inc.’s LSI Zacks Consensus Estimate for the current-year FFO per share has moved up marginally to $5.81 in a week’s time. The company holds a Zacks Rank of 2, at present.

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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