While I was traveling last week, the rumors of an M&A deal surrounding euNetworks became more than rumors. They company’s largest shareholder, Columbia Capital, has launched an effort to buy the rest of the company and take it private, looking to bring the independent western European fiber footprint all the way under its umbrella.
They’ve been moving quickly too since their interest was mentioned less than two weeks ago. As of Friday, via a holding company EUN Holdings, LLP, Columbia had acquired another 17.32% of euNetworks outstanding stock, giving it some 58.93%. euNetworks’ board has appointed Canaccord Genuity Singapore Pte. Ltd. to advise its independent directors on the offer, advising shareholders to wait for the board to consider the offer.
The offer of S$1.16 per share was obviously at a substantial premium to the trading price, which jumped 85% on the news over in Singapore where it is traded. I haven’t done the math yet myself as I don’t follow the stock in Singapore, but I’m told that works out to something like 12 times EBITDA, give or take.
So what does this mean? For the folks at euNetworks, it might mean a change in ownership but probably not a big shift in operational direction. The public listing in Singapore has been more of a burden than blessing anyway in recent years, I doubt they would miss that piece of the puzzle. And it probably pushes back the potential for a buyout by someone like Zayo, at least in the near term. In other words, it would probably simplify the equation in key ways.
Actually, by taking the company private, Columbia Capital would make it easier to fund euNetworks’ growth, particularly when it comes to potential further M&A moves. euNetworks bought Fibrelac a few months back, moving up into the Alps in a small but interesting move. With full control, Columbia might hit the accelerator on other such plans.
The company has long had ambitions to use its footprint as a platform for further consolidation of European fiber assets, but it’s not as easy a process in Europe as we have seen in the USA. International borders in Europe may be lower hurdles than elsewhere in the world, but they’re far bigger than between US states when it comes to things like local market knowledge, language, and culture. Not many competitive providers in Europe have the sort of experience necessary to do it, but euNetworks has proven it can.
On the other hand, Columbia’s move might prompt the board to seek other bids, and one from Zayo, Level 3, or perhaps Interoute or Colt could easily materialize. As a major shareholder, Columbia clearly has the inside track, but a strategic buyer would have more synergies at hand to bolster a bid. And of course, Columbia Capital owns a chunk of Zayo too.
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