REG - Digital 9 Infrastr. - Completion of £300 million investment in Arqiva

Digital 9 InfrastructureAnnouncement

19/10/2022 07:00

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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 investment(1) 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 rated(3).

 

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
service(6). 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 £223m(7).

 

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)  +44 (0)20 7201 8989
 Thor Johnsen / Arnaud Jaguin / Jack McWhinnie

 Rothschild & Co (M&A Adviser)                                +44 (0)20 7280 5000
 Ali Kazmi / Alice Maynell / Nitant Gupta

 J.P. Morgan Cazenove (Corporate Broker)                      +44 (0)207 742 4000
 William Simmonds / Jérémie Birnbaum (Corporate Finance)
 James Bouverat / Liam MacDonald-Raggett (Sales)

 FTI Consulting (Communications Adviser)
 Mitch Barltrop                                               +44(0)7807 296 032
 Gina Magnin                                                  +44 (0)7815 585 751

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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