Boingo Wireless Pops 25% On $854M Takeover Deal By Digital Colony

Shares of Boingo Wireless shot up by 25.1% on March 1 as the wireless software provider agreed to a $854 million buyout deal by Digital Colony Management. As part of the takeover deal Boingo will be taken private.

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According to the deal terms, Digital Colony will acquire all outstanding shares of Boingo (WIFI) for $14 per share, which translates into a 23% premium to the stock’s closing price on Feb. 26. The transaction, which is expected to close in the second quarter of this year, includes the assumption of $199 million of Boingo’s net debt.

Boingo’s CEO Mike Finley said, “We are pleased to have reached this agreement with Digital Colony, which will deliver significant and immediate value to Boingo’s stockholders and concludes a robust strategic review process undertaken by Boingo over the past year. We believe Digital Colony’s expertise owning and operating digital infrastructure businesses, combined with its relationships, resources and access to long-term, private capital markets, will provide greater flexibility for Boingo to continue advancing its business strategy.”

Separately, the company also announced FY20 results with revenues down by 10% year-on-year to $237.4 million, topping analysts’ estimates of $236.9 million. WIFI’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 1% to $83.5 million. The company reported a net loss per diluted share of $0.38 versus a loss of $0.23 in FY19. (See Boingo Wireless stock analysis on TipRanks)

Following the buyout deal announcement, Oppenheimer analyst Timothy Horan removed his Buy rating on the stock.

“There is unlikely to be another bidder as this has been a year-long process, but there is a go-shop provision that lasts until April 2, 2021…,” Horan commented in a note to investors. “As we expected, WIFI shopped itself and will be taken private which was our thesis when we upgraded the stock last fall. This should be a relatively easy merger to complete. There has been an uptick in transaction activity in the industry on low-cost debt, and WIFI has unique infrastructure assets.”

The rest of the Street is sidelined on the stock with a Hold consensus rating based on 2 Holds. The average analyst price target of $14 implies around 1.8% downside potential to current levels.