At the end of May ftgx agreed to be bought by Zayo for $11.45 per share or about $88M, however the deal allowed Fibernet to solicit better offers through mid June. Such an offer in fact has surfaced. According to this SEC filing, RCN Business (NASDAQ:RCNI, news, filings) has offered $96M in cash, or $12.50 per share. A bidding war could be in the offing, and not surprisingly none of the three companies is talking much.
As a merger partner, Fibernet is a pretty good fit for both companies. While it has some assets in Chicago, Miami, and Los Angeles, Fibernet’s business is primarily in the New York metropolitan area. In terms of overlap, Fibernet shares the same turf with RCN Metro, whose largest market by far is NYC area, and therefore RCN seems likely to find substantial synergies. Zayo has some NYC area assets, but its interest in Fibernet is better viewed as an effort to expand both in terms of customer base and territory.
Who is likely to win a bidding war? Both companies seem to have the resources to bid more if they want to, so the question is which of them wants it more. Zayo’s appetite for M&A is well known, and they raised $128M earlier this year explicitly for this purpose, so we know their bid was not an idle one. But RCN Metro has also done well with acquisitions over the last few years, and with both Neon and ConEd Communications fully integrated they seem to be ready for more. At the moment, RCN has the high bid and it’s hard to see Fibernet turning it down, so the ball is probably in Zayo’s court.
On the other hand, given the thaw in the credit markets lately, it is entirely possible that a third suitor could appear. I wouldn’t put it past TW Telecom (NASDAQ:TWTC, news, filings) to make its own bid, their NYC asset base could use the extra density.
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