Mon 03/01/2021 11:52 AM
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Relevant Documents:
Announcement
Merger Agreement

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Takeaways

  • Boingo Wireless Inc. announced today, Monday, March 1, that it has entered into a definitive agreement to be acquired by an affiliate of Digital Colony Management LLC in an all-cash transaction valued at approximately $854 million, including the assumption of $199 million of Boingo’s net debt obligations.

  • Under the terms of the merger agreement, Digital Colony will acquire all the outstanding shares of Boingo common stock for $14 per share in cash. The acquisition price represents a 23% premium to Boingo’s closing price of $11.40 on Feb. 26.

  • The transaction is subject to the receipt of Boingo stockholder approval and regulatory approvals. HSR antitrust approval will be required. The merger agreement caps Digital Colony’s divestiture obligations at a material adverse effect.

  • The agreement also provides for a go-shop period that runs until April 2, and for $19.635 million and $32.725 million fees payable by Boingo and Digital Colony, respectively, in connection with certain terminations of the agreement.

  • The companies say they expect to close the transaction in the second quarter of 2021.


Boingo Wireless Inc. announced today, Monday, March 1, that it has entered into a definitive agreement to be acquired by an affiliate of Digital Colony Management LLC in an all-cash transaction valued at approximately $854 million, including the assumption of $199 million of Boingo’s net debt obligations.

Under the terms of the merger agreement, Digital Colony will acquire all the outstanding shares of Boingo common stock for $14 per share in cash. The acquisition price represents a 23% premium to Boingo’s closing price of $11.40 on Feb. 26.

Boingo is a global provider of wireless connectivity solutions for smartphones, tablets, laptops, wearables and other wireless-enabled consumer devices. The company generates revenue from wholesale partnerships, retail sales and advertising across wireless networks. Its wholesale offerings include distributed antenna systems or small cells, which are cellular extension networks, while its retail products include Wi-Fi services for military personnel living on U.S. Army, Air Force and Marines bases around the world. Boingo operates as one reportable segment: a service provider of wireless connectivity solutions across its managed and operated network and aggregated network for mobile devices.

In its latest 10-K, Boingo reported $263.79 million in total revenue in 2019, with military revenue, which is driven by military personnel who purchase Wi-Fi services on military bases, and multifamily revenue, which is driven by property owners who purchase network installation services and recurring monthly Wi-Fi services and support, accounting for approximately 37% of its total revenue in 2019.
Boingo Total Revenue by Product Offerings 2017-’19

Boingo total revenue

(Source: Boingo 10-K)

Boingo also reported that it generated a significant share of its revenue from its distributed antenna systems, or DAS, operations. The company generates wholesale DAS revenue from telecom operators that pay it build-out fees and recurring access fees so that their cellular customers may use Boingo’s DAS or small cell networks at locations where the company manages and operates the wireless network. In 2019, DAS revenue accounted for about 37% of Boingo’s revenue.

Boingo characterizes the market for mobile internet services and solutions as fragmented and competitive, and states that its direct and indirect competitors include telecom operators, cable companies, self-managed venue networks and smaller wireless internet service providers.

Headquartered in Boca Raton with offices in New York, Los Angeles, London and Singapore, Digital Colony is a digital infrastructure investment firm with over $30 billion in assets under management. Launched in 2017 by Digital Bridge and Colony Capital, Digital Colony is an investor, owner and operator enabling mobile and internet connectivity through investments in mission-critical infrastructure around the world.

The transaction is subject to the receipt of Boingo stockholder approval and regulatory approvals. HSR antitrust approval will be required.

Under the terms of the merger agreement, Digital Colony’s divestiture obligations are capped at a material adverse effect. Digital Colony is not obligated to agree to any divestitures with respect to any of Boingo’s assets or businesses to the extent any such action(s), individually or in the aggregate, would or would reasonably be expected to have a material adverse effect on Boingo and its subsidiaries.

The agreement also provides for a go-shop period that runs until April 2, and for $19.635 million and $32.725 million fees payable by Boingo and Digital Colony, respectively, in connection with certain terminations of the agreement.

The companies say they expect to close the transaction in the second quarter of 2021.

Transaction Details

Consideration

Under the terms of the merger agreement, Digital Colony will acquire all the outstanding shares of Boingo common stock for $14 per share in cash.

The acquisition price represents a 23% premium to Boingo’s closing price of $11.40 on Feb. 26.

Closing Conditions

The merger agreement includes customary closing conditions, including required regulatory approvals:

  • Boingo stockholder approval. The transaction will require adoption of the merger agreement by the holders of a majority of the outstanding Boingo shares entitled to vote.

  • HSR waiting period. The waiting period applicable to the transaction under the HSR Act needs to expire or be terminated.


The merger agreement also lists the following closing conditions: no regulatory restraint, representations and warranties, covenants and no Boingo material adverse effect.

Limitations on Divestitures / Regulatory Best Efforts

Under the terms of the merger agreement, Digital Colony’s divestiture obligations are capped at a material adverse effect. Digital Colony is not obligated to agree to any divestitures with respect to any of Boingo’s assets or businesses to the extent any such action(s), individually or in the aggregate, would or would reasonably be expected to have a material adverse effect on Boingo and its subsidiaries.

Digital Colony is also not obligated to agree to any divestitures with respect to its and its affiliates’ assets or businesses or the businesses or assets of Digital Colony’s direct or indirect equityholders.

Digital Colony and Boingo are to file their respective HSR notifications no later than 10 business days after the date of the agreement.

Digital Colony is to file an antitrust notification in any other jurisdiction if required by any law no later than 20 business days after the date of the agreement.

Timing

The closing is to take place no later than the third business day after the day on which the last of the conditions set forth in article 7 has been satisfied; provided that Digital Colony is not required to consummate the closing prior to the date that is 30 business days after the date of the merger agreement.

The termination date is Aug. 26, 2021 (six months after the date of the agreement).

Company Termination Fee

Boingo will be obligated to pay Digital Colony a $19.6 million termination fee in the event that the merger agreement is terminated (1) by Boingo to enter into a superior proposal or (2) by Digital Colony for a Boingo board change in recommendation or Boingo’s willful and material breach of the nonsolicitation provision; except that the termination fee is $13.1 million if Boingo terminates the agreement pursuant to section 8.1(g) during the go-shop period.

Boingo will also be obligated to pay Digital Colony the $19.6 million termination fee in the event that the merger agreement is terminated (1) by either party for the termination date or failure to obtain Boingo stockholder approval; or (2) by Digital Colony for Boingo’s breach, where (a) an acquisition proposal was announced prior to such termination, and (b) within 12 months of such termination, Boingo enters into an agreement with respect to an acquisition proposal.

Parent Termination Fee

Digital Colony will be obligated to pay Boingo a $32.7 million reverse termination fee in the event that the merger agreement is terminated by Boingo for Digital Colony’s failure to consummate the transaction despite satisfaction of all conditions and Boingo’s written notice that it is prepared, willing and able to effect the consummation of the closing.

Material Adverse Effects

The carve-outs from the definition of any Boingo material adverse effect look standard and include: (1) changes in the industry in which Boingo operates; (2) changes in the general economic or business conditions within the United States or other jurisdictions in which Boingo has operations; (3) general changes in the economy or securities, credit, financial or other capital markets; (4) earthquakes, fires, floods, hurricanes, tornadoes or similar catastrophes; (5) acts of terrorism, war, sabotage, national or international calamity, pandemics or epidemics, including Covid-19, military action or any other similar event or any change; (6) any decline in the market price, or change in price or trading volume, of Boingo’s capital stock; and (7) any failure to meet internal or published projections, forecasts or revenue or earning predictions for any period.

Go-Shop

During the period commencing on the date of the merger agreement and continuing until April 2, Boingo and its representatives have the right to (1) initiate, solicit and encourage any inquiry or the making of any proposal or offer that constitutes an acquisition proposal, and (2) participate in any discussions or negotiations or assist or participate in or facilitate any inquiries, proposals, discussions or negotiations or any effort or attempt to make any acquisition proposal.

Nonsolicitation / Change in Recommendation

Following the expiration of the go-shop period, there is a standard nonsolicitation provision prohibiting Boingo from soliciting or initiating an acquisition proposal or engaging in any discussions or negotiations with respect thereto. There is a standard fiduciary-out provision enabling Boingo to furnish information to and/or engage in discussions with any third party that makes an unsolicited bona fide written acquisition proposal to Boingo prior to the Boingo stockholder vote.

Prior to the time Boingo’s stockholder approval is obtained, the Boingo board is permitted to effect a change in recommendation in connection with Boingo’s receipt of a superior proposal and/or an intervening event. There is a standard five-business-day matching period for Digital Colony in connection with any proposed change in recommendation by the Boingo board.

The definition of intervening event looks standard and refers to an event, fact, development, circumstance or occurrence that affects or would be reasonably likely to affect the business, assets or operations of Boingo that was not known to the Boingo board as of the date of the agreement, but becomes known by the Boingo board after the date of the agreement and prior to the time the requisite company vote is obtained.

Financing

Digital Colony and Merger Sub have secured committed financing consisting of a combination of equity financing from Digital Colony Partners II LP and debt financing from Truist Bank, Truist Securities, TD Bank, TD Securities and CIT Bank, the aggregate proceeds of which will be sufficient for Digital Colony and Merger Sub to pay the aggregate merger consideration. Digital Colony and Merger Sub have committed to use their reasonable best efforts to obtain the financing on the terms and conditions described in the commitment letters entered into with such financing partners.

Digital Colony has delivered to Boingo a complete copy of (1) the executed debt commitment letter by and among Merger Sub and the lenders, pursuant to which the lenders have committed to lend the amounts set forth therein to Merger Sub for the purpose of funding the merger, and (2) an executed equity commitment letter by and among Digital Colony and sponsor, pursuant to which sponsor has committed to provide the amounts set forth therein to Digital Colony for the purpose of funding a portion of the merger.

Governing Law / Jurisdiction

Delaware law governs the merger agreement, except that the debt financing is governed by New York law. The parties submit to the jurisdiction of the Delaware courts, except that any action involving any debt financing source is to be brought in the New York courts.

Advisors

Tap Advisors is serving as exclusive financial advisor and provided a fairness opinion to Boingo’s board, and Gunderson Dettmer is Boingo’s legal advisor.

Credit Suisse is serving as lead financial advisor, and Truist Securities is acting as co-financial advisor to Digital Colony. Debt financing for the transaction is being led by Truist Securities, along with joint lead arrangers and joint bookrunners TD Securities and CIT. Simpson Thacher is serving as Digital Colony’s legal advisor.
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