What You Need to Know about Windstream’s Data Center Transaction



Windstream’s data center transaction

In this series, we will cover some updates from Windstream Communications (WIN), starting with one of the company’s recent transactions. According to a press release by the telecom company on December 18, 2015, “It has completed the sale of its data center business to TierPoint in an all-cash transaction valued at $575 million.”

The press release also noted, “Originally announced on October 19, the transaction includes an ongoing, reciprocal strategic partnership allowing each company to sell its products and services to the other’s prospective customers.”

According to the telecom company, this sale transaction is for 14 data centers. The company had 27 data centers before the completion of this transaction.

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Financial dynamics of Windstream’s data center transaction

As we can see in the above chart, these data centers would have made ~$122 million in annual revenue and ~$41 million of adjusted OIBDA (operating income before depreciation and amortization) if the 2Q15 results of these operations were annualized. Taking these annualized results into account, the sale price of these assets translates into an ~14x adjusted OIBDA multiple.

These operations are a small component of Windstream. The wireline telecom company made ~$1,498.6 million of revenue and ~$387.6 million of adjusted OIBDA during 2Q15.

Instead of taking direct exposures to the stocks in the US wireline industry, you may consider taking a diversified exposure to this space by investing in the SPDR S&P 500 ETF (SPY).

SPY had a total of ~2.4% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Level 3 Communications (LVLT), and Frontier Communications (FTR) as of the end of October 2015.


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