A sale to American Tower would deliver gains for TDF Infrastructure bondholders
Recommendation: TDFINF bonds are a Buy, in a scenario where American Tower Corp acquires the company
Key points to note:
American Tower Corp was reported to be amongst potential bidders interested in buying France-focussed TDF Infrastructure (sources: Bloomberg, FT).
We see American Tower as well placed to win TDF. It is a far larger entity than TDF, benefiting from an EV of US$137bn, and if motivated, then we assume it would be able to pay more than a financial buyer, given the synergy benefits it can extract in view of its significant European business, which incorporates tower assets in France.
A takeover by American Tower would deliver significant upside for TDF bond issues. We calculate that American Tower should be able to maintain its current BBB+ rating at S&P in the event of a cash acquisition of TDF. Assuming a convergence of TDF bonds to the valuations of AMT bonds following a takeover, then we would see scope for 1pt to >3pt of upside for TDF bond issues, beyond the short dated Apr 2026 maturity.
TDF bonds offer different types of CoC protection, which are relevant in a leveraged bid scenario. While the 2028 and 2029 issues offer bondholders the option of a put at par, the 2030 and 2031 issues offer a 125bp coupon step as compensation, in the event of their CoC covenants being triggered.
The TDFINF 2029 issue would offer c.5.5pt of upside in a scenario where its CoC is triggered based on its current price of c.94.5pt, albeit we would not seek to rely on the CoC in a leveraged bid scenario.
Our Buy recommendation on TDFINF issues is contingent on a scenario whereupon American Tower ultimately acquires TDF.