WASHINGTON (MarketWatch) — American Tower Corp. on Wednesday said it will acquire SpectraSite Inc. for $3.1 billion, further enlarging the nation’s biggest provider of towers used to relay wireless phone calls.
The deal follows in the footsteps of a series of mega-mergers among large wireless carriers, giving Boston-based American Tower
greater national scope to match the transmission needs of customers such as Sprint Corp., Cingular Wireless and Verizon Wireless.
Under the agreement, American Tower will offer 3.575 shares of its Class A common stock in exchange for each share of SpectraSite
The merger values SpectraSite at $61.53 per share, based on the price of American Tower on May 3, and reflects a 9.5% buyout premium.
On Wednesday, SpectraSite stock leaped $5, or 8.9%, to close at $61.20 on the New York Stock Exchange. American Tower dropped a penny to finish at $17.20.
By absorbing Cary. N.C.-based SpectraSite, American Tower would boost the number of its wireless and broadcast antenna sites to 22,600 from 14,800 and create a company with more than $1 billion in annual sales.
SpectraSite also gives American Tower a stronger presence in the nation’s biggest markets. The company operates most of its towers in dense metropolitan areas, whereas American Tower provides more coverage in rural areas and along major highways.
The deal also would extend by a wide margin American Tower’s lead over its nearest competitor, Crown Castle International Corp.
which operates more than 12,000 towers. Crown Castle shares rose 10 cents to end at $16.46.
“This combination is a defining event in the tower industry, creating the clear industry leader,” said American Tower Chief Executive Jim Taiclet, who will run the combined company.
Even after the merger closes, however, American Tower would control less than one-quarter of a highly fragmented U.S. market. Yet the deal could spur further consolidation, as rivals try to keep up with American Tower and cater to the needs of the big wireless carriers.
SpectraSite CEO Steve Clark acknowledged that the rash of large wireless mergers played a “critical” role in the company’s decision to sell itself to American Tower. SpectraSite executives had periodically explored the possibility of a sale over the past two years, he said in a conference call.
American Tower expects the new entity to generate $400 million in added savings from the combination of the two companies, a benefit known in Wall Street lingo as “synergies.” The two companies also expect to reduce debt faster and get access to more capital at cheaper rates.
Tower companies took on lots of debt to buy or build transmission sites during the industry’s main growth phase in the late 1990s, when stock prices soared. SpectraSite, for example, bought most of its sites from Nextel Communications and SBC Communications. Carriers sold most of their sites to raise cash and focus on signing customers.
In the past few years, however, tower companies have worked harder to reduce debt and better manage their business. As a result, stock prices have partly recovered from post-boom lows.
In October 2002, for example, American Tower sank to a rock-bottom price of 71 cents a share from a peak of more than $55 two years earlier.
The transaction, subject to approval by shareholders and regulators, is expected to close during the second half of 2005. Shareholders of American Tower would own 59% of the combined company.
SpectraCite’s Clark will join the American Tower board along with three other members of his company. The size of the board will be increased from six to 10.
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