Auction for PE-backed Xplornet hits second round

Sale of the Canadian broadband provider could fetch at least $1.5 billion value.

The sales process for Xplornet Communications, a Canadian broadband provider backed by Catalyst Investors and Sandler Capital Management, has entered its second rounds, three sources familiar with the matter told PE Hub.

The auction comprises of primarily strategic bidders, one of the sources said.

Evercore is providing financial advice to the company, the sources said.

Xplornet, of Woodstock, New Brunswick, provides broadband access to rural Canadians through its network of fixed-wireless towers and two-way next generation satellites in space.

Sources placed the company’s Ebitda in the $175 to $200 million range, estimating a potential sale could command a valuation of at least $1.5 billion.

In September, S&P Global Ratings updated Xplornet’s rating to negative from stable, citing lower-than-expected subscriber growth.

Xplornet is expected to produce 2019 Ebitda in the $175 million to $183 million range, surpassing 2018 Ebitda but falling short of S&P’s previous expectations, according to S&P’s report.

S&P downgraded Xplornet due to its growing debt pile, projecting adjusted debt-to-Ebitda of approximately 7.5x for the next 12 months.

Xplornet reportedly explored a sale over a year ago, retaining UBS and Bank of Montreal to find a buyer, Reuters reported in March 2018.

The 2018 process did not result in a transaction after potential buyers failed to meet sellers’ price expectations, one of the sources said.

Xplornet, formerly Barrett Xplore, received its first institutional investment in 2004, when Sandler Capital injected C$30 million (USD $22.8 million) in the company, an announcement at the time said.

Catalyst in December 2010 joined as an investor in the company.

The company since that time has scaled through add-on acquisitions of other internet and broadband providers, including of NetSet Communications, YourLink and Platinum Communications Corporation.

Catalyst is a New York-based growth equity and venture capital firm that invests in tech-enabled businesses with under $150 million in enterprise value. Catalyst typically makes initial investments of $10 million to $30 million.

The firm is currently investing out of Catalyst Investors IV fund, which closed on $377 million in April 2015.

Sandler Capital was founded in 1990 as a private equity firm specializing in the media, communications and entertainment sectors. Since its inception, the New York-based firm has invested approximately $1.6 billion in 167 transactions across five funds.

Sandler declined to comment. Catalyst, Xplornet and Evercore did not return PE Hub‘s requests for comment.

Action Item: Contact Brian Rich, co-founder and managing partner at Catalyst, at brian@catalyst.com