M&A Journal: Is Intellifiber Next?

May 31st, 2010 by · 6 Comments

The consolidation wave in metro fiber continues to grow.  First there was AGL, then there was Veroxity, and Fibertech and NStar are known to be seeking bids as well.  But in the past few days I have heard from no less than three independent sources that the next to go very well may be Intellifiber, which is  of course the metro and regional fiber arm of Cavalier Telephone.  If true, it would surprise me a bit as Cavalier's CEO Danny Bottoms came from the metro fiber side of things (formerly of OnFiber) and I suspect he values the assets higher than most.

Intellifiber has taken a collection of castaway fiber networks and assembled them into something with real value.  Their most extensive assets are in the regions around Philadelphia, Baltimore, and Washington DC where they have deep central office penetration and many unique coverage areas.  But they also have some interesting holdings in the Rust Belt and in upstate New York, plus some unique longhaul routes that derive from Dominion Telecom's buildout a decade ago.  Some of the rumors indicate a deal is near, however I have no indication yet who, if anyone, might be doing the buying.  That of course won't prevent me from guessing, so let's run through a list of likely suspects:

My top candidates:

  • Zayo - You can't count out Zayo in any metro fiber M&A discussion, and in fact Intellifiber's assets looks like a very good fit for them.  Such an acquisition would give Zayo real depth on the I-95 corridor from Virginia to New York, a complementary footprint in the Midwest, and new markets in upstate NY - all linked together with regional fiber.
  • ABRY Partners - With the RCN acquisition about to close, I can't shake the feeling that we haven't heard the last from RCN Metro.  When I line up Intellifiber's footprint with RCN Metro's, they are extremely complementary, and I doubt that has escaped ABRY's notice.  Other private equity could also be sniffing around of course.
  • TW Telecom - of the larger public metro operators, TW Telecom (NASDAQ:TWTC, news, filings) makes the most sense, as Intellifiber's assets would fill quite a few holes in their national footprint - which amazingly does not include Philadelphia.  However, the assets tend to be aimed at wholesale rather than enterprise customers, and therefore they would need to be reoriented somewhat.
  • PAETEC - I was skeptical of this idea at first.  But PAETEC (news, filings) has been showing more interest in fiber lately, and the Intellifiber model with 400+ central offices on-net seems like their kind of asset.  It's possible, but perhaps not probable.

Less  likely, in my opinion:

  • Level 3, Global Crossing, XO, Cogent, Qwest - None are likely to be buying this kind of asset right now.
  • Lightower - The fit is pretty good, but they are probably too busy with Veroxity at the moment.
  • Other smaller private companies: AFS, Fiberlight, etc - none seem large enough to pull it off.

Of course, just because Intellifiber is soliciting offers doesn't mean a deal is guaranteed or even likely.  The multiples being bandied about for fiber assets like these are quite high, and they could just be exploring the possibility, i.e. finding out just what the market price for these assets now is, not to mention which buyers might show up.

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Categories: Mergers and Acquisitions · Metro fiber

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6 Comments So Far


  • Anonymous says:

    Rob –

    Did you notice AboveNet is seeking to increase their issuable common shares from 30 million to 200 million? Have you heard anything buzzing around which would sync up with such an increase? They seem to be fine growing organically.

    Also, the last investor conference LaPerch did, he was asked who would be a likely buyer of AboveNet. He seemed to think a those who need to reduce their last mile costs would be an excellent fit (aka Global Crossing, CLECs…) as well as some others. Did you catch that?

    • Rob Powell says:

      I have heard nothing specific. In the past I have speculated about a GLBC/ABVT fit, and from an asset point of view that still holds. But I can’t find a price that both sides seem likely to sell at, so if they manage it they will need to be creative.

      As to why Abovenet is increasing their issuable common shares, I think it’s no secret that they are interested in expanding inorganically as well as organically if the right opportunity comes along, and this is simply preparation for that possibility.

  • Suregato says:

    I like the RCN Metro pairing. To me, that makes the most sense, especially if ABRY does look to separate Metro and Cable co.

    • Rob Powell says:

      According to the SEC filings, they are separating the metro from the consumer/sme business as part of the transaction itself.

  • Anonymous says:

    is PAETEC in the works to purchase intellifiber?

    • Rob Powell says:

      I haven’t heard anything other than my own wild speculation on such a combination, but I’ll keep an eye out for anything pointing that direction.

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