An investment group that includes the Abu Dhabi sovereign wealth fund is set to acquire a minority stake in CityFibre Infrastructure Holdings in a deal that would value the UK fiber-optic provider at more than $ 2.7 billion dollars, according to people familiar with the matter.

The investment is believed to come from Abu Dhabi’s Mubadala Investment Co. and the family-related investment arm behind IKEA, the people said.

These are wholesale broadband network providers such as CityFibre and incumbent telecommunications operators such as AT&T. Inc.

in the United States and Britain’s BT Group PLC are working to expand their broadband networks to reach more customers and support the rollout of ultra-fast 5G wireless services.

At the same time, the promise of recurring revenue generated by high-speed transmission of video and other bandwidth-hogging data is attracting investors seeking long-term stable returns.

The deal, if finalized, is expected to be announced in the next few weeks and would value CityFibre at more than £ 2bn, or $ 2.7bn, people said.

CityFibre is controlled by an infrastructure arm of Goldman Sachs Group Inc. and European buyout firm Antin Infrastructure Partners, which together acquired the company in 2018 for £ 537.8million.

London-based CityFibre is expected to raise more than £ 500million from the sale of its stake to Mubadala and Interogo Holding AG, a Switzerland-based vehicle that invests in infrastructure and other assets to generate returns and help secure IKEA independence.

Mubadala oversees a total of around $ 243 billion in assets and a bet on CityFibre would be consistent with previous investments in the sector. In 2018, the fund acquired a minority stake in Hyperoptic Ltd., another UK broadband service provider, for an undisclosed amount. He then sold this stake the following year to the American buyout company KKR & Co.

CityFibre also plans to issue new debt as part of the deal, the people said, giving the broadband network provider a total of around £ 1bn in new money to help fund the rollout. of its network.

CityFibre’s networks are located in more than 60 cities across the UK, according to its website. Customers include Vodafone Group PLC, which uses the networks to provide high-speed internet service in parts of Great Britain, and Three from the UK to support its 5G wireless services. Three is owned by Hong Kong-based conglomerate CK Hutchison Holdings Ltd.

The new funding is expected to support CityFibre’s existing plan to invest £ 4 billion to expand its services to 216 other towns and villages by 2025, as it seeks to cover almost a third of the UK market.

Still, Mubadala and Interogo’s investment in CityFibre comes with risks, coming amid signs of increasing competition.

BT, which also offers wholesale broadband services, said in May that it may seek a partner to accelerate the roll-out of its fiber-optic network to reach 25 million premises in the UK by 2026, against a previous target of 20 million. In July, Virgin Media O2, jointly owned by Liberty Global PLC of John Malone and Telefónica in Spain HER,

has announced plans to modernize its network, paving the way for its potential entry into the UK wholesale broadband market.

Write to Ben Dummett at [email protected]

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Appeared in the print edition of August 24, 2021 under the title “CityFibre broadband provider close to winning investment”.