UFG Private Equity buys Macquarie's stake in Russian Towers

UFG Private Equity buys Macquarie's stake in Russian Towers
Russia’s UFG Private Equity bought the minority stake in Russian Towers from Macquarie Russia & CIS Infrastructure Fund / wiki
By bne IntelliNews November 29, 2018

Russia’s biggest private equity fund UFG Private Equity has announced that it bought a large minority stake in the telecoms towers business Russian Towers from its co-investor Macquarie Russia & CIS Infrastructure Fund (MRIF) for its Fund III, UFG said in a press release on November 29.

Russian Towers is a leading operator of telecoms towers that broadcast the signal for mobile phone companies, the company explained to bne IntelliNews in an exclusive interview.

In the early days of the development of Russia’s mobile phone network the leading operators raced to set up their own networks of towers to capture market share by offering better coverage than their rivals. However, now the Russian coverage is saturated towers are increasingly duplicating each others’ coverage. The economics of operating towers is changing and it makes more sense for competing mobile companies to share the tower infrastructure and so cut their costs by up to a quarter and compete in other areas like services, tariffs and data. Russian Towers’ business is to buy the operators’ towers and consolidate the cover or invest into its own network of towers and rent them to the operators. It's a work in progress as not all the operators are willing to give up their tower networks yet.

UFG has not disclosed the amount or terms of the transaction. It has been active in the sector for several years. The fund was the driving force behind raising $40mn in the first round of financing for Russian Towers and helped persuade institutional investors like the European Bank for Reconstruction and Development (EBRD) to invest back in 2009, the company told bne at the time.

Russian Towers grew fast and signed up all Russia’s incumbent mobile phone players including Megafon, Vimpelcom and MTS. It had a second round of fundraising in 2012 where Macquarie, ADM Capital out of Hong Kong and Japan's Sumitomo, as well as UFG and the EBRD again, put in another $100m. Now Macquarie is exiting.

“Russian Towers is the leader of the independent telecom infrastructure market in Russia, it owns and operates passive infrastructure and provides co-location solutions for mobile operators,” UFG said in a press release. “Through its previous Fund II, UFG was a founding investor in Russian Towers alongside the EBRD in 2009 and remains a significant shareholder. Since inception approximately $160mn of equity capital has been raised to finance the company’s development. UFG syndicated part of the funding required to complete the current acquisition of MRIF’s stake.”

Dominic Reed, partner at UFG Private Equity remarked: “We are pleased that the UFG Asset Management platform increased its commitment to Russian Towers. This transaction re-enforces our interest in infrastructure as a distinctive asset class in our markets.”

The telecoms towers business is a classic private equity investment as the business turns on raising capital to invest in a sector where a lot of the infrastructure already exists and then consolidating the assets before efficiently providing a service back to existing users more cheaply than they can do on their own.

Alexander Chub, CEO of Russian Towers, said: “We have had tremendous benefit from Macquarie’s expertise in similar businesses around the globe and we are grateful for MRIF’s important contribution to the success of Russian Towers during their time as shareholders.”

In the last decade Russian Towers has built up its network so today it operates over 3,000 sites in 55 of Russia’s regions.

UFG Private Equity was founded by investment banking legend Charlie Ryan, who sold his bank of the same name to Deutsche Bank in 2007 at the peak of the market. Today the fund invests in fast-growing companies in Russia and CIS countries, focusing on healthcare, business services, telecoms and technology, and consumer staples and retail.

There are three UFG Private Equity funds that have a total of $712mn of investments and commitments as well as another $186mn in co-investment vehicles, which are the preferred investment mechanism on larger deals.

Macquarie Infrastructure and Real Assets (MIRA) is a division of Macquarie Asset Management, the asset management arm of Macquarie Group, a diversified financial group providing clients with asset management, banking, advisory and risk and capital solutions across debt, equity and commodities, according to the press release. MIRA has specialised in infrastructure investments over the last 20 years. The fund has over €111bn of assets under management worldwide as of September.

 

News

Dismiss