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Elliott's Crown Castle campaign puts fiber unit in play

Nov 28, 2023

Crown Castle CEO Jay Brown in 2019. Photo: Ben Hider/Getty Images

Elliott Management's second attempt at pushing changes at Crown Castle puts the tower owner's fiber business in the crosshairs, setting the stage for a list of companies and private equity firms to start kicking the tires.

Why it matters: Should Crown Castle explore the sale of the fiber unit, as Elliott is demanding, the business could fetch $11 billion-$15 billion from a suitor, according to a source familiar with the matter.

Catch up quick: Elliott published a letter, a 50-page deck and a dedicated website Monday detailing changes it wants at the company, which include a new CEO and new board directors.

  • Elliott invested $1 billion into the company in 2020 and its current stake is worth more than $2 billion, according to the source.
  • Crown Castle (NYSE: CCI), with a market value of around $47 billion, is a real estate investment trust that rents out its towers to wireless carriers such as AT&T, T-Mobile and Verizon.
  • It also has a fiber business, built in part through a handful of acquisitions.

Details: Elliott says that business is pulling down the rest of the company.

  • "All aspects of the fiber strategy must be re-evaluated, including whether Crown Castle is the best owner of its fiber business," Elliott said in its letter.

Zoom in: Plenty of companies and private equity firms have invested in fiber and would be logical suitors if Crown Castle launched a review of the unit.

  • For PE firms, a fiber acquisition would most likely come through portfolio companies in an infrastructure fund, such as those inside buyout giants Blackstone, KKR and Macquarie.
  • EQT Partners and Digital Colony Partners own fiber network operator Zayo, another logical suitor if a sale process were to emerge, according to the source.
  • European firms seeking fiber footing in the U.S. could also take a look, along with large U.S. companies with existing networks and partnerships with Crown Castle, including AT&T, T-Mobile and Verizon.

What they're saying: The Houston company said it looks forward to engaging with Elliott, without addressing specific arguments the hedge fund is making, including its scrutiny of the fiber unit.

  • "The Company's Board of Directors remains confident in Crown Castle's executive leadership as the Company continues to act in the best interests of all shareholders," the company said in the statement.
  • Elliott declined to comment beyond its letter and presentation.

The intrigue: On Tuesday, Crown Castle officially promoted its EVP/COO for Fiber to the EVP/COO for both Fiber and Towers.

What we're watching: All eyes are on the director nomination window that opens Jan. 18, and whether Elliott nominates a slate or if the activist and the company reach some kind of truce before it turns into a proxy fight.

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