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HomeMy WebLinkAbout2012-06-12 - AGENDA REPORTS - NEXTG NETWORKS OWNERSHIP RESO (2)Agenda Item: 7 CITY OF SANTA CLARITA AGENDA REPORT CONSENT CALENDAR City Manager Approval: Item to be presented by: Kris Markarian DATE: June 12, 2012 SUBJECT: ADOPT A RESOLUTION"CONSENTING TO THE CHANGE OF OWNERSHIP CONTROL BETWEEN NEXTG NETWORKS OF CALIFORNIA, INC., AND CROWN CASTLE INTERNATIONAL CORP., IN ACCORDANCE WITH THE CITY'S AGREEMENT WITH NEXTG NETWORKS OF CALIFORNIA, INC. DEPARTMENT: Public Works RECOMMENDED ACTION 1. City Council adopt a resolution consenting to the change of ownership control of NextG Networks of California, Inc., and Crown Castle International Corp. in accordance with the City's Agreement with NextG Networks of California, Inc. 2. Authorize the City Manager or designee to execute the attached Consent to Change in Control of NextG Networks of California, Inc., subject to City Attorney approval. BACKGROUND The proposed resolution provides the City Council's consent to the merger between NextG Networks of California, Inc. (NextG), and Crown Castle International Corp. (CCI) under the terms of the City's Right -of -Way Use Agreement (Agreement) with NextG, which was executed in May 2011, and is currently in force and effect. The Agreement allows for the installation of antennae nodes on select City traffic signal poles or third -party poles located within the City's right-of-way for the purpose of operating the NextG network and improving wireless coverage and capacity within the City. Section 1 I of the Agreement requires City consent for "assignment" of control of NextG that may result from a merger, consolidation, reorganization, business combination, or other transaction, whereby 20 percent or more of NextG's ownership interests will change. The City received a request from CGI for consent to such a merger with NextG, as is required by the Agreement. Adopted: R y 5 Based on the information received from CCI, staff anticipates no conflicts or violations of the terms of the City's Agreement with NextG, who will survive the merger and continue to own and operate its facilities within the City. Accordingly, all documents, bonds, permits, and insurance associated with the Agreement and with the remaining installation work to be performed are anticipated to remain in the name of NextG and will remain subject to the same terms and conditions as described in the original agreement. ALTERNATIVE ACTIONS Deny the consent for merger between NextG and CCI and terminate the Agreement with NextG to use the City's right-of-way for NextG antennae installations. FISCAL IMPACT There is no fiscal impact if the resolution is adopted. If the resolution is not adopted, the fiscal impact is a loss of revenue at five percent of the adjusted gross revenue received annually from installations made within the City, which is estimated to total $2,100 per year. ATTACHMENTS Resolution Letter Request on behalf of Crown Castle International Corp. FAQs Regarding Merger Consent to Change of Control of NextG Networks of California, Inc. 9 RESOLUTION 12- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA, CALIFORNIA, CONSENTING TO THE CHANGE IN OWNERSHIP CONTROL OF NEXTG NETWORKS OF CALIFORNIA, INC. WHEREAS, the City has agreed to allow NextG Networks of California, Inc., to install telecommunications equipment on City traffic signal poles or third -party poles located within the City's right-of-way for the purposes of operating the NextG network and improving wireless coverage and capacity within the City, per the Right -of -Way Use Agreement entered into on May 2, 2011; and WHEREAS, under the terms Section 11 of said agreement, it is required that any merger between NextG Networks of California, Inc., and another party, consisting of 20 percent or greater change in ownership shall be consented to by the City prior to consummation; and WHEREAS, NextG Networks of California, Inc., and Crown Castle International Corp. are proposing to enter into a merger agreement representing a change in control of 20 percent or more; and WHEREAS, NextG Networks of California, Inc., will remain a separate and existing legal entity following the merger, and accordingly, the parties to the City's Right -of -Way Use Agreement will remain unchanged upon and after the effective date of the Change in Control transaction; and WHEREAS, the terms of said agreement between the City and NextG Networks of California, Inc., are not expected to be violated or breached by the proposed merger; and WHEREAS, the proposed change in control of NextG Networks of California, Inc., is not expected to have a detrimental effect on the City, its right-of-way facilities, or its residents; NOW, THEREFORE, the City Council of the City of Santa Clarita does hereby resolve as follows: SECTION 1. The City is willing to grant its Consent to Change in Control of NextG Networks of California, Inc., with respect to the merger with Crown Castle International Corp. in accordance with Section 11 of the current Right -of -Way Use Agreement. SECTION 2. The City Council authorizes the City Manager or his designee to execute the Consent to Change in Control of NextG Networks of California, Inc. SECTION 3. The City Clerk shall certify to the adoption of this Resolution. 3 PASSED, APPROVED, AND ADOPTED this day of 2012. MAYOR ATTEST: CITY CLERK DATE: M STATE OF. CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF SANTA CLARITA) I, Sarah P. Gorman, City Clerk of the City of Santa Clarita, do hereby certify that the foregoing Resolution was duly adopted by the City Council of the City of Santa Clarita at a regular meeting thereof, held on the day of 2012, by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: CITY CLERK 3 5 STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF SANTA CLARITA ) CERTIFICATION OF CITY COUNCIL RESOLUTION I, , City Clerk of the City of Santa Clarita, do hereby certify that this is a true and correct copy of the original Resolution 12- adopted by the City Council of the City of Santa Clarita, California on 2012, which is now on file in my office. Witness my hand and seal of the City of Santa Clarita, California, this day of 2012. City Clerk By Deputy City Clerk 4 '" © SALTER 0 J OYC E ® Z I K E R Barry G. Ziker Direct Dial: 206.957.5952 Email: bziker®sjzlaw.com January 10, 2012 VIA FEDEX City of Santa Clarita Attn: Kenneth Pulskamp, City Manager 23920 Valencia Boulevard Santa Clarita CA 91355 Re: Consent to Change in Control of NextG Networks Dear Mr. Pulskamp: The City of Santa Clarita ("City") and NextG Networks of California, Inc. ("Next&") are parties to a Right -of -Way Use Agreement dated May 2, 2011 ("Agreement"). Under the terms of the Agreement, the City's consent is required in the event NextG is subject to a. change in control. As more fully set forth in the enclosed Consent to Change in Control of NextG Networks of California, Inc., NextG requests that the City consent to a proposed change of control transaction between, among others, NextG's parent company (NextG Networks, Inc.) and Crown Castle International Corp. ("CCI"). Additional information is set forth in the enclosed FAQ sheet. We would appreciate very much your assistance in securing the City's consent to the proposed transaction and related change of control, including consideration by the City Council, if applicable, within the next thirty (30) days. Duplicate originals of the Consent signed on behalf of NextG are enclosed. Should you have any questions, please contact me (we are counsel for CCI) or, in connection with any questions directed to NextG, please contact: Robert Delsnran SVP Government Relations & Regulatory Affairs 890 Tasman Drive Milpitas, CA 95035-7439 . (510) 859-3596 rdelsman(o)nextenetworks.net Please note that the address shown above for NextG is the address to be used for notice purposes under Section 9 of the Agreement. 9(1 SALTER JOYCE ZIKER, PLLC 0 1601 Fifth Avenue, Suite 2040 Seattle, wA 98101 ■ p 206.957.5960 f'206.957.5961 ■30VvQJIP Ab City of Santa Clarita January 10, 2012 Page 2 Thank you in advance for your prompt and favorable consideration in this matter. Sincerely, SALTER JOYC ZIKER7 PLLC arry G. i er 6/ cc w/enc: NextG Networks of California, Inc. Crown Castle Solutions Corp. BGZ:BT Enclosures 3044 005 Ia100111 001 NextG, Networks of California, Inc. Change in Control Transaction and Consent — FAQs What is NextG requesting from the City? Under the terms of the right of way agreement between the City and NextG Networks of California, Inc. ("NextG"), the City's consent is required if NextG or its parent company wishes to transfer a certain level of ownership interests to a third party, although the consent may not be unreasonably withheld, conditioned, or delayed. What is the nature of the change in control transaction and who are the parties? NextG is wholly owned by NextG Networks, Inc. ("Parent"). Parent and Crown Castle International Corp. ("CCI") entered into an agreement on December 15, 2011 that, upon closing, will result in Parent being wholly owned by Crown Castle Solutions Corp. ("Solutions"), which, in tum, is a subsidiary of CCI. 3. Will NextG still exist after the proposed transaction? Yes. NextG (and Parent) will survive the merger and will continue to own and operate the telecommunications facilities within the City. 4, Will NextG still be the party to the right of way agreement? Yes. NextG, along with the City, will continue to be a party to the agreement. There is no change in the parties to the agreement. Only consent to the change in the ultimate ownership of NextG is requested. 5. Does CCI or any of its current subsidiaries have experience operating distributed antenna system (DAS) networks or other telecommunications facilities? Yes. CCI, through its subsidiaries, owns, operates and leases towers and other infrastructure for wireless communications, offering significant wireless coverage to 92 of the top 100 U.S. markets. CCI, through its subsidiaries, owns, operates and manages over 22,300 tower and rooftop sites throughout the United States and is one of the largest tower operators in the country. Solutions and its subsidiaries have deployed 40 DAS networks with several additional DAS networks in development or under consideration. Wholly-owned subsidiaries of Solutions hold authorizations to provide intrastate telecommunications services in the District of Columbia and 23 states. Additionally, it is anticipated that many NextG personnel will continue to hold key technical and managerial positions after the change in control to support existing and planned DAS network operation and deployment. 6. Does CCI have the financial strength to support ongoing operations? CCI, the ultimate parent company, is a public company; its stock is traded on the New York Stock Exchange (symbol: CCI). As of the close of business on October 28, 2011, CCI had a NextG Networks of California FAQs - 1 3044 005 0090402.CA E market capitalization of more than $12 billion dollars. CCI generated, on a consolidated basis, $1.87 billion in revenues and $657 million in recurring cash flow during the fiscal year ended December 31, 2010, and $513 million in revenues and $198 million in recurring cash flow for the quarter ended September 30, 2011. 7. Has the California Public Utilities Commission been asked to approve the proposed change in control transaction? Yes. NextG has initiated the approval process for the change in control transaction. CONTACT INFORMATION For CCI: Barry G. Ziker Salter Joyce Ziker, PLLC 1601 Fifth Avenue Suite 2040 Seattle, WA 98101 (206) 957-5952 bziker@sjzlaw.com For NextG. Robert Delsman SVP Government Relations & Regulatory Affairs 890 Tasman Drive Milpitas, CA 95035-7439 (510) 859-3596 rdelsmana,nextp,netwo rks. net NextG Networks of California FAQs - 2 3044 005 ia090402.CA I Q CONSENT TO CHANGE IN CONTROL OF NEXTG NETWORKS OF CALIFORNIA, INC. This Consent to Change in Control ("Consent') is granted and effective this day of 2012 by the City of Santa Clarita, California (the "City") with respect to NextG Networks of California, Inc., a Delaware corporation ("NextG"). Recitals A: NextG provides telecommunications services to . wireless carriers through distributed antenna systems and other facilities located within the United States. B. The City and NextG entered into a Right -of -Way Use Agreement dated May 2, 2011 ("Agreement) that provides, in relevant part, as follows: 11. ASSIGNMENT 11.1 Transactions Requiring City Consent. Consummation of the following transactions related to this Agreement, or involving NextG, requires the prior written consent of the City Council expressed by resolution, which consent will not be unreasonably withheld, conditioned, or delayed: (ii) Any merger, consolidation, reorganization, business combination, or other transaction wherein or whereby 20 percent or more of the ownership interests in NextG, or in any parent company of NextG, will be affected and control of NextG will change or be subject to change. As used herein, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of NextG. A duly executed copy of any written instrument evidencing the closing and consummation of any such transaction must be filed in the office of the City Clerk. C. NextG is a wholly-owned subsidiary of NextG Networks, Inc., a Delaware corporation ("Parent'). On December 15, 2011, Parent entered into an Agreement and Plan of Merger with, among others, Crown Castle International Corp. (NYSE:CCI), a Delaware corporation ("CCP'), whereby Parent will become a wholly-owned indirect subsidiary of CCI and a wholly-owned direct subsidiary of Crown Castle Solutions Corp. ("Solutions"), and thereby effect a change in control of Parent (sometimes referred to as the "Merger"). D. NextG will remain a separate and existing legal entity following the Merger, and accordingly, the parties to the Agreement will remain unchanged upon and after the effective date of the change of control transaction. E. The City is willing to grant its prior written consent to the change in control of NextG as provided under the Agreement on the terns and conditions set forth below. 1 3044 005 1a100110 a NOW THEREFORE, in consideration of the recitals set forth above, and for other good and valuable consideration, the parties hereby agree as follows: 1. The City Council consented to the consummation of the Merger by resolution dated 12012. 2. Effective as of the date of this Consent, the City hereby grants its consent to the change in control of NextG as provided under the Agreement in connection with the Merger. 3. This Consent shall be governed by and.construed in accordance with the laws of the State of California, regardless of the laws that otherwise govern under the principles of conflicts of laws. 4. This Consent shall be binding upon and inure to the benefit of the parties to this Consent and their respective designees, affiliates, successors and assigns. 5. This Consent may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, whether in original or facsimile form, it being understood that all parties need not sign the same counterpart. [no further text; signature page follows] 22 12- 2 3044 OD5 Ia100110 In witness whereof, the parties have executed this Consent. effective as of the date first shown above. NEXTG NETWORKS OF CALIFORNIA, INC. By Robert L. Delsman Senior Vice President Government Relations & Regulator y Affairs 3044 005 ia100110 3 CITY OF SANTA CLARITA 0 Printed Naine Title Date: APPROVED AS TO FORM: Printed Name Date: 13