The XO/Icahn soap opera is starting to get some real attention, with this story in the Wall Street Journal today. That certainly brings some firepower to the reporting, they have much more extensive contacts than I do and hence got some nice bits of information. Amongst them is the identity of the two unsolicited bidders for the company back in June 2008, which had been mentioned in the redacted legal documents as Bidder 1 and Bidder 2.
Bidder 2, who offered $940M for just the wireline assets and not the NOLs or Nextlink, was said to have completed 7 acquisitions in the past 18 months. I had thought it had to be Level 3, because while Zayo fit the number more accurately the size of the bid just seemed beyond their reach. But in fact it really was Zayo, which must mean that the company’s private equity backers saw a huge opportunity and were apparently willing not just to double their existing bet but to quadruple it. I can easily imagine Zayo CEO Dan Caruso wanting to get his hands on all that fiber, because he knows what to do with it. What a shocker it would have been if he had been able to pull that off!
Bidder 1, who offered something like $1B for the entire company, was amazingly PAETEC (news, filings). Such a bid so close on the heels of the McLeodUSA acquisition suggests a big change in Paetec’s view of itself. Taking its own $1.6B in revenues and seeking to put it onto the longhaul, regional, and metro fiber footprint of XO and McLeod would have been a stunning reversal for what had until 2008 been an entirely fiber-free CLEC – a good one in my opinion yet stunning nevertheless. But still, it is hard to figure out where that money would have come from, their existing debt had covenants which were already worrying the market at the time. Indeed Paetec’s share price collapsed last summer even before the market really melted down, largely on those worries.
And not in the picture, by name at least, were either TW Telecom (NASDAQ:TWTC, news, filings) or Level 3 Communications (NYSE:LVLT, news, filings). Either could have been the third still unnamed suitor who never actually got that far. Perhaps that is because they had tried the year before, had been rebuffed, and knew that Icahn wasn’t going to let it go.
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