Infra funds set to circle major German fibre sale

04 June 2019 - 12:00 am UTC

Warburg Pincus is considering selling a stake in German fibre broadband provider Inexio, with infrastructure funds likely to be attracted to the business’ extensive expansion plans. 

The New York-headquartered private equity firm, which owns a 59.45% stake, is planning to exit the business, said a source. But it has not yet launched a sale, and it has also not made a decision on the size of the stake it plans to offload.

Saarlouis-headquartered Inexio operates 9,900kms of fibre optic network and six data centres, and also provides cloud services. It hopes to take advantage of the need for fast broadband in Germany, and plans to add 50,000 new customers this year. Last year it added 29,200 customers and 1,900km of new fibre networks.

Rothschild is expected by sources to advise Warburg Pincus on a potential sale, although the French bank declined to comment.

Warburg Pincus bought its stake in Inexio in 2016 in a deal which gave the business an enterprise value of around EUR 250m. Inexio posted annual EBITDA of EUR 38.5m in 2018, a 47.7% increase on the business’ 2017 EBITDA of EUR 20.1m.

Inexio CEO’s David Zimmer announced in April that the business was in talks with undisclosed sovereign wealth funds and insurance companies to raise EUR 300m-500m. The new capital would allow Inexio to invest up to EUR 4.5bn into its fibre network and grow its customer base from 105,800 to one million by 2030. 

These expansion plans make the business an even more attractive prospect for infrastructure funds, with deals in Europe’s fibre broadband sector commanding EBITDA multiples of around 10 times.   

On Monday, [3 June] MIRA submitted a bid for the UK fibre operator KCOM which valued the business at 9.8 times EBITDA multiple, while in March Basalt Infrastructure bought Isle of Man-based Manx Telecom for a 12 times EBITDA multiple. Last April EQT Infrastructure paid a 14.5 times EBITDA multiple to buy Norway’s Broadnet. 

KKR Infrastructure is also looking to refinance EUR 650m of existing debt in its German fibre developer Deutsche Glasfaser, as reported. This is partly to provide extra capital to fund the business’ immediate growth plans, including the expansion of its fibre network in Wendeburg, Frankenthal, Leipzig and Viersen.

Deutsche Glasfaser grew its number of customers from 42,000 when KKR bought a majority stake in the business in 2015, to around 200,000 by late 2018.  

KKR’s business mainly focuses on the roll out of fibre broadband in Germany’s rural areas.

While Germany’s roll out of next generation broadband has meant that around 90% of the nation’s population is covered by fast broadband, only slightly above half of the rural population is covered, according to the European Commission.

Last month Inexio said that it had invested EUR 6.5m to expand a fibre network in the town of Neunkirchen by 70km adding a further 13,000 households and businesses to the network. 

Warburg Pincus and Inexio declined to comment.


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