Fibertech Finds Its Buyer

August 26th, 2010 by · 16 Comments

According to reports, private equity firm Court Square Capital Partners is buying up Fibertech, taking it off the hands of Nautic and Ridgemont Equity, which used to be part of Bank of America.  The value of the deal was pegged at $500M, though the extent to which that number has been rounded off is unclear to me.  Fibertech builds and sells/leases metro and regional dark fiber in tier 2/3 markets across the northeast and mid-Atlantic, plus a couple in the Midwest.  Court Square will pay for the deal partially via its own funds, partially via debt to be raised, and partially via an investment by Fibertech’s management.

It was back in March we learned that Fibertech was up for sale, and at that time I was told by sources close to the auction that if anything happened it would probably be in August – and they were right on the money.  However, it’s not going to change the competitive environment too much as rather than consolidating assets it is simply changing private equity hands.  I had heard rumors that Lightower was close to winning the auction, and I had earlier speculated that ABRY might buy it to combine with RCN Metro – both of which would have been interesting combinations with synergies.  But with this deal, Fibertech will continue as an independent force in the metro fiber business.

Unless of course Court Square has further plans, which certainly could be the case.  According to reports, Fibertech indicated its intention to expand beyond its current geographies under the new ownership, but they didn’t specify whether that would be organically or inorganically.  For Court Square to outbid other fiber operators and for Fibertech’s management to go in on it with them, it certainly sounds to me as if they have some interesting plans in mind.

So far we have RCN Metro, AGL Networks, Veroxity, AFS, KDL, and now Fibertech.  Who’s next?  Those remaining that are thought to be for sale include NSTAR up in Boston, and Alpheus down in Texas.

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Categories: Mergers and Acquisitions · Metro fiber

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16 Comments So Far

  • Dave Rusin says:

    Congrats to FiberTech! Amazing to see a PE firm paying at a strategic multiple level of 11x. Conventional wisdom says, IPO FiberTech down the road.

    Here is the conundrum for an IPO if things stay the way they are … if Wall Street Analysts continue this 5x-6x multiple garbage on publicly traded fiber based companies, getting a return off of 11x today could be a challenge.

    My prediction over time is that Wall Street will distinguish between companies like AboveNet, Zayo/AFS and FiberTech purely by growth, margins. predictability and low churn over the vertically oriented application driven companies.

    The so called “dumb pipe” business isn’t looking so dumb.

  • en_ron_hubbard says:

    Dave– what, I think, you must remember is that emerging telecom has been a vale of tears for investors for the past ten years. Given the various crashes and spectacular flame-outs investors (and analysts) are rightly hesitant to jump on the bandwagon and ascribe growth multiples to small previously BK entities like ABVT– they need to PROVE the thesis over some extended period of time. Is dense metro fiber a differentiated model with sustainable growth and barriers to entry? I think probably yes but I also understand why there are skeptics as to valuation..

    Of course, that is when money is to be made so maybe you should flip some of your AFS loot into ABVT?

  • Rob Powell says:

    One just has to shake their head at PE firms paying such premiums above what the rest of the market values an asset like Abovenet at. Someone thinks they know something and are getting in ahead of the crowd they expect to follow eventually.

    • Dave Rusin says:

      First person knowledge – PE firms have been looking at this space for the last four years. When a PE firm beats out strategic buyers, you have to wonder how that ever happened … I would like to see some analyst on quarterly calls ask a few pointed questions on this … keep in mind, when PE moves, historically its like lemmings. So is the last few PE deals unique or is more to follow?

  • Anonymous says:

    It seems like those same analysts have forgotten the flame outs related to the data center business who now receive double digit multiples… Just a matter of time for the pure-play fiber models.

  • Rob Powell says:

    Honestly though, the datacenter business is easy for the street to comprehend, whereas the fiber business is much more opaque. The street is a bit gun shy partly because the past has taught them that they don’t understand the business.

    • Homer says:

      well… a lot of people in the fiber business don’t understand it either… sometimes I wonder if is there anyone who really knows what’s going on and how to make money in it (other than Rob, of course)

      • Dave Rusin says:

        No barriers to entry for a data center and capex is a continuum as kit becomes obsolete … it is an ongoing capex eating machine … lots of new data centers being announced … supply v. demand … eventually the data center bubble will burst …

  • carlk says:

    Opaque and lack of comprehension. That’s funny when thinking about the BLIND and IGNORANT who comprise Wall Street along with all the dark fiber that clouded any legacy vision they may have had due to “GLUTS.”

    Of course, they could listen to visionaries like Jim Crowe, which sometimes they did, and have had their first dollars in addition to almost every subsequent dollar investments over a period of nearly thirteen years decimated.

    Is there something biblical about the number thirteen? Because I too, have had enough of DUMB PIPE stories.

    Give me “intelligently allocated” fiber loaded with individually perceived, valuable content at the right locations at the right time. Make my FIBER smart!

    • Dave Rusin says:

      There never was a fiber “glut” just a glut of “stupid money”, a glut of dumb CEO/CFO’s with the stupid money and a glut of Wall Street analysts not willing to go beyond today’s spreadsheet and the next quarter.

      Telecom is a near term and long term game — always has been and always will be. Natural growth of bandwidth demand is slowly squeezing the ILEC rental CLEC rabbits out of the race as the fiber tortoises who were conservative keep moving one step slowly at a time ..

      And all the fiber owners and there share owners who did not spend foolishly, lived happily ever after …

  • carlk says:

    No argument with me there, Dave. Maybe it was the Suria Ghoul back then, who correctly and aptly pointed to “slicing and dicing” methods in the form of DWDM which placed such important “conduits” to the future on hold.

    In order to put an end to this MYTH, here’s what I’d like you to do for me, “TODAY,” Davey!

    As Ron Paul’s “Gold/Silver plea” is making news across various venues-Audit Fort Knox!- the past couple of days, I want you to propose to these scoundrels in Congress that they explore falling back to Ben Graham’s “commodity basket” treatise multiple decades old now, and add “OPTICAL” fiber as the main component on a weighting basis, in order to accomplish stored up “value, intrinsically” tied to this nation’s currency, since that, it is in our BEST INTERESTS to ensure that, “The Information Age,” is not, nor ever DERAILED from bringing individuals great LIBERTY and FREEDOM for time perpetuity.

    The mismanagement of such an IMPORTANT COMMODITY to its NATION’s people, a proccess which would cause UNDUE stress upon the people for having to DIG the earth up in order to provide sufficient “capacity” to continue the “Information Age,” would place a heavy burden and expense unto those people!

    You can do it, Dave. And, if the black cars with G Men or more nefarious conduits of the same people come to take you away, it will have been worth it on behalf of your people in you doing and saying so!

  • Dave Rusin says:

    Here is the big secret of the REGULATED telecom industry after swimming in the telecom pool for over 30 years … nothing happens as fast as third party research reports forecasts and analysts predict – period. I get a kick in the @$$ every time I read about 100 gigabyte technology coming to market … maybe the aggregated demand might be there to meet it in 5-7 years.

    And carlK, I have never peed in the Telecom Pool all those years … unlike others!

    A quick shout out to my BFF Jules!!!

  • carlk says:

    I don’t want you to pee. I want you to “cry” at the top of your lungs for as loud as you can, so they will not merely hear you, but ACT!

    Without FIBER there are NO APPS! Without APPS, there are no ADVANCEMENTS for SOCIETY at large.

    Fiber must be COMPENSATED appropriately, period!

    If Big Jim was one who peed in the telecom pool, please replace him with a better kind who know how to control themselves.

  • carlk says:

    Some “directors” are seeing fit to start this “process” by replacing Big Jim’s “shares.”

    Men should always live below their means lest they expose themselves to the harsh cruelties which life sometimes confronts them with.

    “It might as well” be him.

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