Baltimore Shop Makes Wireless Tower Play

Target: Tarpon Towers LLC

Price: $45 million

Sponsor: ABS Capital Partners

Legal Adviser: Sponsor: Hogan & Hartson

ABS Capital Partners hopes to dial up its past success in the wireless communications arena with its most recent investment. The Baltimore-based firm on June 9 invested $45 million in Tarpon Towers LLC, a company that buys and builds cell towers.

The deal is intended to help the Sarasota, Fla.-based company branch further outside of its Florida base to build and buy towers along the East Coast, Deric Emry, a partner with ABS Capital, told Buyouts. The company, which also owns towers in Connecticut and California, is currently negotiating possible deals with management of potential acquisition targets. ABS Capital invested $25 million of equity and procured an additional $20 million in senior debt from Regions Bank in Arkansas to get the deal done.

Emry said he believes many of the industry trends that drew the firm in the late 1990s to SBA Communications, a Boca Raton, Fla.-based owner-operator of telecommunications infrastructure, are still evident today. For example, companies such as AT&T are expanding their networks to meet customer demand, he said. Meanwhile, total minutes used by wireless phones grew about 15 percent to more than 2 trillion in 2008, according to wireless industry estimates. Those types of trends are expected to continue as more people substitute wireless phones for landline connections.

At the same time, valuations for these types of companies, which were high when credit was available, have been falling, Emry said. ABS Capital earned a 10x return on capital when it exited SBA in 2000.

Executives at ABS Capital also have experience with the management team at Tarpon: CEO Ronald Bizick was previously COO of SBA Communications and COO of Global Signal Inc., another former portfolio company of ABS Capital that was sold to Crown Communications in 2006. William Freeman, the company’s president, was formerly the CFO of Global Signal and System One Services Inc., also a former ABS Capital portfolio company.

The investment in Tarpon Towers comes from ABS Capital Partners VI LP, which the firm has recently closed with at least $400 million in commitments. Fund VI marks an increase of at least $100 million from its previous fund, closed in 2006. However, the firm’s third and fourth funds, raised in 1999 and 2000, closed with $427 million and $450 million in commitments, respectively. In March, the firm announced its first investment with the fund, the purchase of a $30 million minority stake in Zoom Media & Marketing, a New York-based digital marketing and promotion company.