DGI9 taps investors after buying £436m stake in broadcast network provider

Digital 9 Infrastructure looks to break through £1bn just 15 months after launch as it unveils a 48% equity stake in television and radio network provider Arqiva Group and launches its fourth share issue.

Digital 9 Infrastructure (DGI9 ) is looking to break through £1bn just 15 months after its launch as it unveils a £436m investment in television and radio network provider Arqiva Group.

The £300m cash and £135.5m debt purchase of a 48% equity stake in Arqiva, the first of DGI9’s investment where it does not have overall control, sees the £919m investment company launch its fourth share issue since a £300m flotation in March last year. 

The 5%-yielding income fund is offering new shares in a placing and offer for subscription at 110p. This represents a 3% discount to last Friday’s closing price of 113.4p and a 5% premium to the last published net asset value of 104.62p at 31 December.

Although no target for the fund raise has been set, analysts at Stifel said DGI9 would need to raise £200m to keep the big investment within a limit of 25% of gross assets and to support follow-on investments in existing holdings. 

As things stand, before the share issue, Arqiva will become the fund’s largest single holding at around 35% of net assets, Iain Scouller, Stifel analyst, said. 

DGI9 last raised £95.2m in January at 108p. Although it fell short of a £200m target, two previous issues in September and June were oversubscribed and raised a total of £450m.

The company’s existing ordinary shares this morning dipped 1.7% to 111.5p, above the placing price. 

DGI9 is buying the stake in Arqiva from CPP Investments, manager of the Canadian state pension.  

Based in Gerrards Cross, Buckinghamshire, Arqiva is the sole operator of digital terrestrial television and radio infrastructure in the UK, with around 1,450 transmission sites serving broadcasters including the BBC, ITV, Discovery, BT Sport and Sky. 

It also operates a network of 80 ground stations delivering 1,100 tv channels across the world via 30 third-party owned satellites.

Arqiva has expanded into the utilities sector with a smart metering platform connected to 12m premises in the UK.

In the year to 30 June 2021, the group generated underlying profits of £332.4m, meaning DGI9 is paying a multiple of 8.5 times earnings for its stake. At the time Arqiva had nearly £1.9bn in debt.

Phil Jordan, chair of the Jersey closed-end fund, said: ‘Arqiva expands the company’s exposure to wireless networks and will support the company’s total return and yield target as we continue to build a high-quality portfolio of scalable platforms and technologies.’

Fund manager Thor Johnsen, head of digital infrastructure at Triple Point Investment Management, said: ‘The core, contracted nature of Arqiva’s national broadcasting service is completed by its high growth and innovative smart metering and connectivity solutions. 

‘The business benefits from the utility sector’s need to manage data more effectively across networks, whilst it continue to maintain long-term cash flow from its national broadcasting service.’

The acquisition leaves the portfolio with eight investments, 43% in wireless networks, 39% in data centres and 18% in subsea fibreoptic networks.

DGI9 says the portfolio will generate £85m of cash flow this year, ‘significantly in excess’ of what it requires for its dividend target. 

Triple Point says it has £510m of potential investments at an advanced stage out of  a total pipeline of about £2.4bn. 

 

 

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