M&A Poll Followup: XO Again Of Course

January 13th, 2012 by · 13 Comments

Yesterday I asked readers the annual January question of which US network operators were most likely to get bought this year, and while the poll will remain open for a few days yet let's take a look at the trends thus far.

As they have each of the last few years when I asked this question, XO was the runaway leader. The difference this year is that Icahn has finally taken the first step, forcing out the remaining minority investors and giving him unfettered access to those NOLs he wants so badly. Come August, everyone expects the company to go up for sale since the status quo is not sustainable and Icahn doesn't seem ready (at this time) to double down and do the consolidation himself.  Instead, last autumn's round of layoffs seem to indicate he's cleaning it up to raise EBITDA and maximize the price he can get.

If an auction for XO does happen, there would be half a dozen or more likely bidders including but not limited Level 3, tw telecom, Windstream, Earthlink, Zayo, and even CenturyLink - which could get a lot out of the Tier 1/2 metro assets.  But whether anyone will meet Icahn's price is an entirely different question, because it ain't going to be what he bought out minority investors for.

The next five (AboveNet, Sprint Wireline, Sidera, Broadview, and Integra) all make sense to someone. Personally, I think if AboveNet or Sidera were going to be sold soon, they would have done it last summer -- but you never know. Sprint Wireline and Broadview were my other picks as well. The former because the timing seems right for Sprint to turn it into cash and the latter because their owners have been trying to sell it for a while now and Earthlink will probably be ready to take it on soon.

But there was an interesting change from last year's poll. Almost nobody expects Zayo or Level 3 to get bought this year, whereas last year each was in the top 5. Last year, there was a school of thought that had Zayo's private equity backers ready to cash in. But when that didn't happen and instead the 360networks deal did, it pretty much shot down that thesis. Likewise after the Global Crossing deal, whether one likes Level 3 or not nobody thinks they're going to get bought I guess.

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Categories: CLEC · Mergers and Acquisitions · Metro fiber

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13 Comments So Far


  • Haha says:

    Zayo will recap somehow this year with longer owners bowing out with a nice profit…

  • Anonymous says:

    I believe that Zayo and Xo will become one. Carl Icahn may be a difficult owner but buying out Zayo and there original investors to gain not only the zayo network but more importantly the zayo leadership team would be a brilliant move. He can buyout zayo for who knows, 750 million-1 billion, then run combined for 2 years and sell the whole package for 3 billion +. You would have to salivate at having the seasoned zayo team running the xo asset if you were icahn.

  • anon says:

    it seems like people on this board are still confused that Icahn’s investment in XO’s tax NOL assets is related the unprofitable CLEC that they also run ??

  • Carlk says:

    One other thing that might be getting missed is where Zayo fits into the equation, i.e. acquirer or acquiree?

    From what I have gleaned from Dan Caruso over the years, is his adherence to Buffett business principles. One might even describe him as a Buffett disciple according to some of his writings.

    I don’t think Dan would let himself be bought by Icahn, especially if he was not to retire in the sunset and cared about his legacy, versus buying an Icahn enterprise when the opportunity arose.

    But WTH do I know? I still believe LVLT is beginning to PENETRATE the $100B plus REVENUE SANDBOX I have been hearing about for more than one decade!

  • Brian Boru says:

    Icahn has already demonstrated he is completely uninterested in building XO. He has been busy smearing lipstick and inserting breast implants on this Sus scrofa domesticus for some time. He will dump it as soon as the 1 year waiting period is over so he wont have to share anything he stole from his fellow XO shareholders. The question is who is going to buy XO? I doubt it can be a share deal because no one in their right mind is going to want that miserable SOB on their BOD.

  • { says:

    Brian B you hit the nail on the head

  • Carlk says:

    Brian B, no remedial classes on analogies for you no matter what Anonymous might say. I love your sub species analogy of this DOMESTIC PIG.

    Since it’s derived from The Wild Boar Family, one might have to rule out Zayo from purchasing this animal while it is being dressed for the final kill, and subsequent feast by its ancestry who want it back, including but not limited to war reparations.

    http://en.wikipedia.org/wiki/Domestic_pig

  • Rob Powell says:

    No chance Icahn buys Zayo. He’d have to pay top dollar to get the current owners to sell, and he never pays top dollar for anything. And even if he did, he’d never let management have a free hand and Caruso & his team would therefore likely just jump ship and start again somewhere. If a deal happens, it’s Zayo doing the buying – they’ve supposedly bid already once in the past.

    • Grant Lewis says:

      Agreed. Icahn’s a value buyer. He’s primarily looking for distressed assets. Icahns certainly has the cash to afford Zayo but its not his M.O. to pay top dollar. He’d rather buy it distressed, maximize pull through synergy opportunities and flip it … even it takes 7 years.

  • b ebbers says:

    You can put lipstick on a pig . But at the end of the day , its still a pig.

  • Anonymous says:

    My original thought was not so much an Icahn buyout but more of a merger of Xo and Zayo. Original zayo investors take some money off the table, but retain a stake in future which has a potential to be large. This appeared to be there desire over the summer, take money off the table or outright sale of company, and a deal with XO would meet the criteria. I do agree however that Zayo reporting in to Icahn would be a strech or better said not happening. Would have to be some significant ground rules on that arrangement for caruso and company to buy in a relationship with Icahn.

    Question is do they have the resources to get in bidding war with companies like tw telecom and Level 3 with there never ending supply of money. I dont think they would win that and would need to be creative if they wanted xo badly which is why a deal with icahn allowing him to retain stake in future somehow looked appealing and likely to me.

  • Anonymous says:

    For the love of God please dont let Zayo and XO merge I am trying to get a job with Zayo at this time. I was laid off by XO in October and I would really like to keep the idiots that are in mid management to upper to senior managment out of my life. Nothing good can come of such a merger, XO is dead in the water, not sure Zayo wants dead weight. Can Zayo just acquire the XO network and not bring over anyone who currently works for XO, esp any manager.

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