Crown Castle urged by investment firm to delay acquisitions, raise dividend
Crown Castle International Corp. is being urged by an activist investor to better utilize its balance sheet and return more money to shareholders before pursuing more acquisitions, including Verizon Communications Inc.'s wireless network towers.
In a letter Tuesday, Corvex Management LP said Crown Castle should increase its dividend payout ratio or boost its leverage ratio and buy back more stock. Corvex, after recent meetings with the company's management, said that following its suggestions could boost Crown Castle's stock to more than $100, a 27 percent jump from Monday's closing price.
Crown Castle, which was founded in Pittsburgh, has been a buyer of towers, most recently with a $4.8 billion purchase and lease deal with AT&T Inc. last year. The Houston-based company has an operations center at Southpointe in Cecil, where it employs about 700 workers. The nation's largest operator of cell towers is expanding its offices in the Washington County business park.
Verizon hired bankers to work on a tower sale by year end, two people familiar with the situation said last month, in a deal that could fetch about $6 billion. Crown Castle has told Verizon it would be interested in a deal, Jay Brown, the tower company's chief financial officer, said last month during an investor conference.
“If the company does not have the right cost of capital, it should not be pursuing acquisitions or issuing equity, whether for Verizon's towers or any other transaction,” Keith Meister, managing partner at Corvex, said in the letter. “But let's be clear, we want Crown Castle to correct its capital allocation plan, reduce its cost of capital, and then bid for the Verizon towers.”
Crown Castle rose nearly 3 percent to $80.80, up $2.33. The stock earlier reached as high as $82.03, the highest intraday price since the company's initial public offering in 1998.
Since converting into a real estate investment trust, or REIT, at the start of the year, Crown Castle's shares had risen 10 percent, underperforming the 14 percent gain in the Standard & Poor's 500 Real Estate Index.
Crown Castle said it plans to address its capital allocation plans, including its dividend, on its third-quarter earnings call Oct. 31.
“We continually review our capital allocation strategy and consider all input from our shareholders as we aim to create long-term shareholder value,” CEO Ben Moreland said in the statement.
“We expect Corvex's letter and presentation to be well received by shareholders,” Wells Fargo & Co. analyst Jennifer Fritzsche wrote in a note to clients. The suggestions could help Crown Castle prepare an offer for Verizon's towers, which would fit well with its U.S. carrier concentration, Fritzsche wrote.
