American Tower to Acquire CoreSite Realty for Over $10B

Real estate investment trust American Tower Corp. (AMT) has signed an agreement to acquire rival CoreSite Realty Corp. (COR) for approximately $10.1 billion.

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Following the announcement of the news, shares of American Tower closed 4.3% down on Monday. However, the stock gained 0.2% in the extended trading session to end the day at $261.

Meanwhile, shares of CoreSite gained 3.6% to close at $172.51. The stock, however, slipped 0.1% in the after-hours trading session. (See Insiders’ Hot Stocks on TipRanks)

Transaction Details

As per the terms of the agreement, American Tower will pay $170 per share in cash and assume or repay CoreSite’s existing debt.

The acquisition, which is likely to close by the end of this year, is expected to be modestly accretive to American Tower’s AFFO per share in the beginning. It is anticipated to make significant contributions to American Tower’s AFFO per share over time.

About American Tower

Headquartered in Massachusetts, American Tower owns and operates wireless and broadcast communications infrastructure in several countries across the world. Its portfolio consists of nearly 219,000 communications sites.

About CoreSite

CoreSite is a Colorado-based real estate investment trust that owns, acquires, builds and operates strategically located data centers. At the end of the third quarter of 2021, the company had 25 data centers, 21 cloud on-ramps and more than 32,000 interconnections in eight markets in the U.S.

Moreover, CoreSite generated adjusted EBITDA and revenue of $343 million and $655 million, respectively, during the third quarter.

Management Comments

The CEO of American Tower, Tom Bartlett, said, “We expect the combination of our leading global distributed real estate portfolio and CoreSite’s high quality, interconnection-focused data center business to help position American Tower to lead in the 5G world.

“As the convergence of wireless and wireline networks accelerates and classes of communications infrastructure further align, we anticipate the emergence of attractive value creation opportunities within the digital infrastructure ecosystem.”

The CEO of CoreSite, Paul Szurek, stated, “The combined company will be ideally positioned to address the growing need for convergence between mobile network providers, cloud service providers, and other digital platforms as 5G deployments emerge and evolve.

“In addition, we expect the enhanced scale and further geographic reach to provide a platform for the combined company to accelerate its growth trajectory and expand into additional U.S. metro areas, as well as internationally, leveraging American Tower’s extensive presence across the globe.”

Wall Street’s Take on CoreSite

After the acquisition news was announced, MoffettNathanson analyst Nick Del Deo downgraded the rating on CoreSite to Hold from Buy but raised the price target from $156 to $170 (1.5% downside potential).

The analyst said, “American Tower will attempt to leverage CoreSite’s portfolio to accelerate and enhance its edge strategy by creating an end-to-end solution for customers.”

Analyst Recommendation for CoreSite

Overall, the stock has a Hold consensus rating based on 4 Buys, 5 Holds and 2 Sells. The average CoreSite Realty price target of $156 implies 9.6% downside potential. Shares have gained 47.7% over the past six months.

Smart Score for CoreSite

According to TipRanks’ Smart Score rating system, CoreSite scores a 7 out of 10, suggesting that the stock is likely to perform in line with market averages.

Analyst Recommendation for American Tower

Overall, the stock has a Moderate Buy consensus rating based on 5 Buys and 4 Holds. The average American Tower price target of $302.29 implies 16% upside potential. Shares have gained 18.6% year-to-date.

Hedge Fund Confidence in American Tower

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in American Tower is currently Positive, as the cumulative change in holdings across all 11 hedge funds that were active in the last quarter was an increase of 88,400 shares.