Latham & Watkins advises Telefónica on sale of Costa Rica assets

Madrid and New York-based teams from law firm Latham & Watkins have acted as counsel to Telefónica on its sale of assets in Costa Rica to Liberty Latin America. 

The all-cash transaction values Telefónica Costa Rica at an enterprise value of $500 million on a cash- and debt-free basis, and which equates to an estimated multiple of 6.0x Telefónica Costa Rica’s fiscal year 2019 Adjusted OIBDA, including projected annual run-rate synergies, Liberty said in a statement.

“We have had great success in Costa Rica through our 2018 investment in 80-per cent-owned Cabletica, a leading fixed-provider in the country and one of LLA’s fastest growing businesses, and are excited to increase our investment in the country,” Balan Nair, president and CEO of Liberty Latin America, said.

“Telefónica Costa Rica has delivered strong financial performance, including high single-digit top-line growth and strong double-digit Adjusted OIBDA growth from 2017-2019. Combined with Cabletica, we look forward to creating a leading integrated communications player providing customers in Costa Rica with high-quality value propositions and unparalleled customer service,” he added.

“This transaction comes at an attractive valuation, consistent with our disciplined approach towards M&A.”

Telefónica Costa Rica is Costa Rica’s second-largest mobile service provider. As of June 30, 2020, the business had 2.3 million subscribers, and its mobile network currently has approximately 90 per cent LTE population coverage.

Liberty Latin America intends for Telefónica Costa Rica to become part of the VTR credit pool, which will also include Cabletica, and to finance the acquisition (including fees and expenses) with incremental local borrowings and borrowings at VTR Finance, targeting approximately 4x debt on the acquired asset’s Adjusted OIBDA, Liberty said.

The remaining funding is anticipated to come from LLA liquidity including future free cash flow generation, as well as other forms of debt and/or equity capital.

The transaction is subject to certain customary closing conditions, including regulatory approvals, and is expected to close in the first half of 2021.

Earlier this year, Liberty acquired AT&T’s operations in Puerto Rico and the US Virgin Islands.

Latham & Watkins acted as counsel to Telefónica with a multi-jurisdictional team, including Madrid-based partner Ignacio Pallarés and New York-based partner Antonio del Pino (pictured), who is also co-head of the firm’s Latin America practice. Also involved were associates Francisco Lanusse and Alan Rozen, in Madrid and New York respectively.

In fiscal matters, Telefónica was advised by Latham & Watkins Madrid-based partner Jordi Domínguez and associate Blanca Vázquez de Castro, while New York-based partner Jeff Tochner and associate Meredith Ward advised the Spanish company on intellectual property matters.

Liberty Latin America was advised on the transaction by JP Morgan, LionTree and Scotiabank.