Following many months of speculation about the sale of its fiber-based, business services unit, Altice USA announced Tuesday it has agreed to sell 49.99% of its Lightpath unit to Morgan Stanley Infrastructure Partners (MSIP).

Altice USA will retain a 50.01% interest in Lightpath and maintain control of the company. The New York-based operator said the deal with MSIP carries an implied enterprise value of $3.2 billion – Altice USA will receive total gross cash proceeds of about $2.3 billion from the sale and related financing activity (net cash proceeds of $1.1 billion after-tax and initial debt repayment). The deal with MSIP is expected to close in the fourth quarter of 2020.

Roughly 18 months ago when speculation surfaced that Lightpath was being shopped, analysts at Cowen & Co. suggested that a transaction involving the unit could draw interest from an infrastructure fund and bring in as much as $3 billion to $4 billion in pre-tax proceeds.

"Bringing in a strategic investor allows Altice USA to focus on operating our core businesses while infusing the capital needed to grow Lightpath and maximize shareholder value," Altice USA CEO Dexter Goei said in a statement.

A possible sale of all or part of Lightpath has been brewing for well over a year as Altice USA explored strategic options for the unit. It has taken longer than expected for Altice USA to find what it viewed as the right deal.

Last summer, for example, Bloomberg reported that Altice USA was nearing the sale of a minority stake of LightPath to Stonepeak Infrastructure Partners. That New York-based private equity firm has an investment portfolio that includes data center company Cologix and ExteNet Systems, a provider of outdoor and indoor wireless connectivity. Crown Castle, Charter Communications and CenturyLink were among other companies speculated as having potential interest in the Lightpath assets.

As Altice USA explored options for Lightpath, analysts covering the company suggested that a sale of all or part of the unit would allow the operator to put more focus on its core business – residential connectivity – and serve as a catalyst for the stock. Altice USA shares were up $0.59 (2.43%) to $24.85 each in after-hours trading Tuesday.

Lightpath accounts for about one-third of Altice USA's total business services revenue in markets such as government, education and healthcare. As of June 30, Lightpath had more than 11,400 buildings connected to a fiber network that covers more than 8,800 route miles in the New York metro region.

Altice USA said it would discuss the deal in more detail when it announces Q2 2020 results on Thursday (July 30).

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— Jeff Baumgartner, Senior Editor, Light Reading