You heard it here first ten days ago, and rumor has indeed become reality. Zayo Group has in fact agreed to purchase AGL Networks, the metro fiber arm of energy utility AGL Resources. After the purchase closes in the next 60-120 days, Zayo will take possession of the metro assets in and around three markets: Atlanta, Phoenix, and Charlotte. Financial information for the deal was not provided, but multiple sources peg the deal at roughly $70M and 9x EBITDA – a premium to the current market price for such assets but not a surprising one. There were multiple interested parties, but Zayo has been the most aggressive in the sector when it comes to M&A so it is not surprising that they won the auction.
Zayo already had a metro ring in Phoenix purchased from Citynet a while back, but they now will become one of the city’s major alternative providers. Atlanta and Charlotte will be new markets for them, Atlanta being AGL’s largest market and Charlotte being a new one entered just last year. In total the footprint covers 795 route miles with some 287 on-net buildings. AGL has offered only dark fiber, whereas Zayo offers a wider array of services and will probably be spending some cash to light that fiber itself and expand operations. This one is about expansion more than deriving synergy, so we will have to watch and see where Zayo takes the assets.
Might there be further M&A down the line for Zayo? I suppose that depends on finding willing sellers like AGL looking to monetize a non-core asset. There are still a few other energy companies out there sitting on piles of dark fiber.