Over in Europe, another pan-European fiber operator just might leave the public markets and go private. Colt has received an offer from its majority shareholder, Fidelity, for the 37.6% of the company it doesn't already own. The price tag of £569m sent Colt's stock up 20% today in London.
Colt has been treading water for years, reorganizing on a regular basis and generally not pulling out of it. Despite an on-net footprint of more than 20,000 buildings across the major markets of the continent and a growing data center business as well, the company's exposure to voice churn and general regional economic headwinds has kept them from establishing a growth trend.
Now, why would Fidelity be moving to take the company private? The one thing it does not mean is the status quo will remain. Last year they had Colt buy its sister company KVH for a presence in Asia, and this move will let them take the whole bundle out of the public eye. Fidelity either wants to put more money into consolidation of the industry without having to justify it to investors, or it wants to wrap it all up with a pretty bow to sell off later for even more.
Actually though, one could argue that Fidelity's move to acquire the rest of the company is an effort to get an auction rolling. Colt's independent directors wasted no time saying the offer was insufficient and undervalued the company, but didn't actually recommend against it. In other words, 'someone please bid more'. There does seem to be room, as the offer seems to value the company at $2.73B which is an EBITDA multiple of less than 6.
I've long speculated that the company's destiny is to be acquired by Level 3, with whom there are obvious synergies. At this price, Level 3 surely would have to be interested despite the fact that its busy with the tw telecom integration. And they might not be the only potential US-based buyer. Zayo nowadays could be in the running, although their potential synergies would be lower just because the footprint overlap is smaller. Interoute is perhaps another potential bidder, and in fact gave signs of being more aggressive in consolidation recently as well.
But for now it's Fidelity making the offer.
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