AboveNet Inc., the operator of fiber-optic networks based in White Plains which came close to being taken over last year, has agreed to be acquired by one of its competitors, privately held Zayo Group of Louisville, Colo. The purchase price is $2.2 billion, or $84 a share.
The price represents a 13 percent premium over AboveNet”™s closing stock price on March 16 and a 21 percent premium over the average closing stock price for the past 60 days.
“Over the last five years Zayo has acquired a very impressive set of fiber infrastructure assets,” said Bill LaPerch, president and CEO of AboveNet. “The combination of AboveNet”™s and Zayo”™s assets creates a dense fiber footprint throughout North America and Europe for a bandwidth-hungry world.”
Zayo, which is aiming to meet skyrocketing demand for fast data services, will receive new capital as part of the deal ”“ from GTCR, a Chicago-based buyout firm, and Charlesbank Capital Partners, a current investor. The deal is not subject to financing.
AboveNet has until April 17 to find a better offer. If that does not happen, the Zayo deal is expected to close by midyear.
But Donna Jaegers, analyst at D.A. Davidson & Co. in Denver, says Zayo may have competition. “AboveNet has a very clean balance sheet, and there is the possibility that other bidders may emerge,” she said. “CenturyLink is one. They bought Qwest Communications at this time last year (in a $10.6 billion deal). What they need to complement Qwest is more local fiber, especially in large markets.” “Comcast may be interested or Cox Cable,” Jaegers added. “Both have a presence in business services and are talking about addressing large enterprise customers. AboveNet would give them very strong assets in major markets.”
Jaegers called Zayo”™s bid a shrewd move, since the company and AboveNet are competitors. “Zayo has made 17 acquisitions of local fiber properties since 2005. Both have been trying to buy other smaller companies. By Zayo taking out AboveNet, (it removes their competition) and they can move in and scoop up the crumbs.”
As for why AboveNet put itself in play in the first place, Jaegers said the impetus came from within.
“AboveNet had gotten pressure from one of its owners, Corvex, to boost the stock or put itself up for sale at $84 to $87 a share. Rather than try to build to that value, they tee themselves up,” she said.
“We thought they had a buyer at midyear last year but that was around the mid-$70 price target. That deal fell apart. It sounded like they had a private equity bidder interested but ran into financing issues.”
Five-year-old Zayo owns a 45,000-route mile network that covers 42 states and the District of Columbia. It reported a loss of $1.1 million for the fourth quarter of 2011.
AboveNet, founded in 1993, operates metropolitan networks totaling 9,000 route miles and a long-haul fiber network of about 13,000 miles. The company earned almost $73 million on revenue of $472 million last year.
