Two investment firms have acquired network and fiber service provider Zayo Group Holdings -- and its 12.2 million miles of fiber -- in a cash deal valued at $14.3 billion.
As a result of this purchase by Digital Colony and the EQT Infrastructure IV fund, Zayo will transition from a public company to a private provider of mission-critical bandwidth to enterprises in North America and Europe. Subject to the usual caveats, including regulatory approval, the deal should close in the first half of 2020.
"I am confident this partnership with EQT and Digital Colony will empower Zayo to accelerate its growth and strengthen its industry leadership," said Dan Caruso, Zayo chairman and CEO, in a statement.
The Zayo team, including its top executives, is slated to remain intact at its current headquarters in Boulder, Colo.
"Zayo has a world-class digital infrastructure portfolio, including a highly-dense fiber network in some of the world's most important metro markets," said Marc Ganzi, Digital Colony's managing partner, in a statement.
The fiber provider has a 130,000-mile network in North America and Europe. It includes metro connectivity to "thousands of buildings and data centers," according to the provider. Its communications infrastructure solutions include dark fiber, private data networks, wavelengths, Ethernet, dedicated Internet access and colocation services.
Zayo also owns and operates a Tier 1 IP backbone, plus 51 carrier-neutral data centers. Zayo's Cloudlink service provides enterprises with low-latency private connectivity to the public cloud. Other clients include wireline and wireless carriers and large enterprises, plus verticals such as media, technology, content, finance and healthcare.
Zayo also has 12.2 million miles of dark fiber. This unlit fiber is connected to 1,210 data centers and Zayo is adding 9,000 miles to this dark-fiber network, the provider said. In addition to simply accessing this fiber, operators can tap Zayo for offerings such as 24/7 advanced monitoring or private dedicated networks, according to Zayo.
In the money
Zayo executives were unavailable for comment, citing the quiet period around an acquisition. But Wall Street spoke: In pre-market trading, Zayo's stock rose 9%, ending the day up 7.7% at $33.00 per share. Shares had fallen 11% over the past 12 months, MarketWatch reported on Wednesday.
Zayo reports earnings based on two lines of business: Communications Infrastructure (CI) and Allstream. CI includes Fiber Solutions, Colocation, Transport, Enterprise Networks and Other, and accounted for $555.2 million of its third-quarter consolidated revenue of $647.2 million. In the period ended March 31, net income totaled $34.7 million; of that, CI generated $39.2 million (but the Allstream segment lost $4.5 million).
Communications Infrastructure was responsible for $306.9 million of the $321.3 million of adjusted EBITDA. Third-quarter net income grew $4.5 million versus the prior quarter.
Under terms of the deal, which Zayo's board unanimously approved, Zayo shareholders will receive $35 per share of common stock in cash. The offer price by Digital Colony and EQT represents a 32% premium to the volume-weighted price average of the stock's six-month value of $26.44. The acquiring firms will also assume $5.9 billion of Zayo's net debt obligations. Shareholders must still vote on the offer.
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