The Wall Street Journal reported yesterday that both Sidera and FiberLight are for sale. Of course Ramblings’ readers knew about Sidera already, as I broke that news last week. As for FiberLight, they are owned by the Thermo group and have been since 2003. I’m certain that they’d sell if they got the price they want, however Thermo has made sure FiberLight has the funding to expand and I suspect their price won’t be cheap. But those aren’t the only rumors I’m hearing right now. Actually, it’s quite chaotic on the rumor front, much like it was last year around this time – there are lots of assets in play. Here are a few rumored deals that seem to be popping up the most:
TW Telecom to buy Zayo – I’ve heard this from several sources now, with no confirmation. There are pros and cons to such a deal. The footprints are complementary and Zayo’s private equity owners could very easily see this as a good exit path. However, the price would surely be high, higher than TWTC’s multiple in the public markets. Also, Zayo is principally wholesale with lots of fiber and transport while TWTC is principally focused on the enterprise with IP/Data. They could add 1+1 and get 3, but they’d have to really want to – and I’m not sure TWTC is ready to expand that focus.
Zayo to buy Sidera – Obviously this can’t be true if the preceding rumor is. But if Zayo’s backers aren’t selling then they’re probably buying and Sidera may be the most likely target. It could even be a stock deal, whereby ABRY keeps its foothold in the metro fiber space while gaining nearly national scale. In fact, the idea of some of the private equity guys who powered the buying last year joining forces on reasonable terms is pretty attractive. All sorts of combinations make sense then – Zayo+360Networks+Sidera, FiberLight+Lightower+DukeNet, Sidera+Fibertech+24/7Fiber etc. Not that those are actual, live rumors — I’m just rambling.
XO is now soliciting bids – Again, several have told me this but nothing definitive yet. The two bidders that come up the most are PAETEC and LVLT, although if those two are there then surely TWTC, Zayo, Earthlink, and a few others can’t be far away. However, I suspect that even if this rumor is true, what we’re seeing is the special committee seeking comps in its valuation of that offer by Icahn which remains outstanding and unresolved. Icahn has yet to indicate he is ready to actually sell, though if that did happen I think things would move very quickly. Perhaps XO will tell us a bit more when they report earnings, which will likely be at the last possible minute – which I think is on Monday (5/16).
Any other rumors making the rounds out there? Leave a comment!
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Here is a little piece from LBO wire:
Technology5/11/2011 – Fiber-optic network companies Sidera Networks, backed by Abry Partners, and FiberLight LLC, a Thermo Capital Partners LLC company, are on the sales block, people familiar with the matter said, hoping to fetch high prices amid explosive demand for high-speed communications services.
Sidera, which operates an Internet network in cities such as New York and Chicago, is seeking around $800 million, these people said. That price is about 10 times its roughly $80 million in annual earnings before interest, taxes, depreciation and amortization, and in the range of what other fiber-optic companies have recently sold for, they added.
Sidera, the Latin name for “constellation of stars,” operates a network that it says carries every major stock-exchange trade in the New York City area. The company was previously known as RCN Metro Optical Networks, a unit of RCN Corp., which was taken private by Abry Partners for $1.2 billion.
FiberLight had about $50 million in annual Ebitda and is seeking as much as $500 million, the people familiar with the matter said. Founded in 1998, FiberLight provides network services, including broadband Internet, in and around cities such as Atlanta, Houston and Miami.
In 2005, Thermo Capital acquired FiberLight, then known as Xspedius Fiber Group.
The companies have hired investment banks to run auctions and contacted private equity firms and large telecom groups that may be interested in the sales. AboveNet Inc., Paetec Holding Corp. and tw Telecom Inc. are expected to take a look, people said.
Representatives for Sidera and FiberLight did not return requests for comment.
Companies that own and operate fiber-optic networks are seeing a reversal in their fortunes amid surging Internet traffic use for video, photographs and music.
When many of these fiber networks were first laid in the late 1990s, Internet usage hadn’t matured, and companies such as Global Crossing Ltd. filed for bankruptcy protection to reduce their debts.
Last month, Level 3 Communications Inc. said it would buy Global Crossing Ltd. for $1.9 billion, in a deal that will merge the two companies’ fiber-optic networks. Last year, a number of regional fiber operators, including KDL Inc. and Fibertech Networks LLC, found buyers.
I’ve heard that lvlt has zero interest in XO (after having looked a few years ago).
Ten times EBITDA would value XO at $2.4b
If XO is for sale, it won’t be cheap.
TWTC and XO have a perfect match that maximizes the synergy and creates way more saving north of $200 million.
Unless Crusty Carl has done a complete reversal, this rumor, if true, is just to get comps for his next “improved” offer as his previous statements basically have limited the interest of others in wasting their time doing due diligence and making an offer that he basically said he has no interest in doing. Let’s hope Grivner’s departure was the beginning of Carl saying he has changed his mind and is willing to sell
My bet is TW is more interested in FiberLight. Having acquired the remainder of Xspedius several years ago.
This may be the purchase that TW has been waiting for. Will they pay the premium that it is worth or does Thermo just want out?
I hear XO is evaluating offers. One has to agree that one reason is for comparison of icahns offer but it seems strange if icahns intent were to hold the asset long term he wouldnt hire a CEO. Tw telecom, paetec, earthlink, etc could all benefit from taking down asset.
i’m just a lowly XO intern, but the place is BUZZING about a deal happening by the end of Q2 with TW telecom.
BTW, business is BOOMING here so maybe old man icahn figures it’s now or never…
Are you in corporate Va. location?
If a rumor like that makes it down to a lowly intern then the general public should have heard about it. Hence, you are full of $h!t………..
Can’t speak on the rumor, but business is BOOMING!!!
I heard that a small carrier in NYC & Long Island has some money people who want them to buy Sidera. I would be supprised if an underdog comes out of the shadows like Worldcom buying MCI
ELNK raising debt…is this just coincidental to this M&A fervor?
Press Release Source: EarthLink, Inc. On Thursday May 5, 2011, 4:15 pm EDT
ATLANTA, May 5, 2011 /PRNewswire/ — EarthLink, Inc. (NASDAQ:ELNK – News) today announced plans to offer $400 million aggregate principal amount of senior notes due 2019 in a private offering to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 (the “Securities Act”) and outside the United States in reliance on Regulation S under the Securities Act.
The net proceeds from the offering may be used to redeem up to $255.8 million of EarthLink’s 3.25% Convertible Senior Notes due 2026 and for working capital and general corporate purposes, including possible acquisitions.
I’ve been thinking about Charter Communications. With new of securing the service to sell it’s California assets for a rumored value of $2.5B, and news yesterday that they “closed on the public sale of $1.5 billion in aggregate principal amount of senior unsecured notes due 2021” wonders what Charter needs the $4B for. Could a company like Suddenlink or even slightly larger Cox Communications be a target?
A few things lend credibility to the XO aquisition rumor. The most obvious is the lack of a CEO. Next is the 400 empty seats in the back office when business is growing at a sustained rate. Another is the unique financial structure of the revolving credit line that Ichahn gave XO.
Who would you rank as the top 4 XO suitors?
I can see so many companies in which XO would make a good fit to their portfolio. The ideal fit when looking souly at network and assets would be TWTC. However the TWTC conservative business approach would not mesh well with XO’s cowboy style.
Hmmm, 1. TWTC, 2. PAET, 3. Zayo, 4. ELNK
They have pretty much integrated the Nuvox assets and are looking to expand out of the Southeast. They would have no problem issuing additional debt in order to purchase XO.
Y’day, PAET said no more M&A this year. I think you have to drop them down the list. CTL would make my #4 edging out L3.
I think if PAET said that, then it suggests that they believe XO isn’t available yet/now/whatever. Because I think they’d make an exception if it were.
My concern with XO is that they are not a pure play on fiber. They have a lot of copper. I own a lot of shares, I just could not pass on them at .15, but I’m wondering about how attractive they really would be at this point. I’ve considered dumping and moving into ABVT or TWTC many times … with the profits, just never did it to date. I keep holding onto the fact that even though they don’t have the assets some of the other pure metro fiber plays have … they are still the most undervalued asset on the market … presently. Sure would like to hear your opinion, Rob.
AND now Abovenet up for sale. Metro valuations must be at a perceived high for so many to look for the exits.
Perfect fit for the merger with Zayo.
Zayo doesn’t have the firepower to buy Abovenet does it? We’re talking $2B just to sit at the table I’d think.
Not sure Rob, but according to what I’ve heard, they have access to backers that would make this possible and they are supposed to be considering it. I confess to not owning any ABVT shares … though I have been watching them for years … and just never pulled the trigger … much to my disappointment (but one only has so much cash to place). In fact, a week ago I was going to ask your advice between a position in ABVT and TWTC. I know it is a discussion that has been talked to death in the past, but wondered about your recent opinion… too late now … the cats out of the bag IMO, and I hate buying after a pop. Metro pure plays are still hot though. Given the landscape, I think Zayo is going to continue to get richer and richer. Wish I could buy into that group (directly).