One of this summer’s bigger infrastructure rumors is getting closer to reality. A Reuters report on Friday says that Crown Castle has indeed made a bid for Lightower Fiber Networks. The bid is said to exceed $7B including net debt, and is now being considered by Lightower and its private equity owners at Berkshire Partners.
Lightower’s network spans some 33,000 route miles hooking up as many as 22,000 on-net locations including more than 7,000 towers and small cells. Geographically, their supraregional network stretches from Maine in the northeast to Chicago to the west to North Carolina in the south.
Lightower has itself been quite aggressive over the past decade. The names it has subsumed include Fibertech, Sidera, Lexent Metro Connect, Veroxity, Open Access, Keyspan Communications, and Hudson Valley Datanet.
Rumors have swirled since last summer that Berkshire was ready to cash in, but this spring the action seemed to really get started. Other potential buyers could have been Zayo, Uniti Group, a cable operator such as Comcast or another private equity group. Yet, Zayo has been busy lately with a management reorganization and a growing focus on organic opportunities, such a deal is probably too big for Uniti Group at this stage, and despite being a favorite of analysts to eventually buy a fiber operator Comcast has been pretty quiet.
But lately Crown Castle has been quite aggressive, most recently acquiring Wilcon and FPL Fibernet, and since June they have been the favorite in the race to acquire Lightower. If it happens, it will be the company’s biggest move so far. It might keep them busy for a while, but it probably wouldn’t be the last fiber M&A for Crown Castle.
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As much as I hate Crown Castle in general, at least Sunesys has been making their network maps available in a reasonable, useful form.
Any idea what the financials are for Lightower?
Give or take $500mm in EBITDA, so this would be a healthy multiple.
Perhaps the biggest takeaways here would be that if they are interested in scaling up their fiber business to this degree: 1) they will likely start to make a more serious go at the non-small cell businesses of the assets they’ve acquired – so far they have put those on the back burner somewhat; 2) they will have now spent >$11bn on fiber assets…Crown buying Zayo (with a current enterprise value of $13bn) is much more believable (sure they might want to sell off small chunks of the biz like Allstream and zColo). I had been skeptical of this previously; 3) similarly, they would have massive cost synergies at their disposal to go after Zayo – the industrial logic of LT+Sunesys+FPL+Wilcon etc plus Zayo is off the charts; 4) Crown seems to think they could pull this off without compromising their REIT status…
Lots of very interesting things to chew on. Thank you.
Other interesting takeaway here: To the extent others believe it is now more likely Crown will eventually have Zayo in its sights, given its appetite as demonstrated by this potential Lightower purchase – it could ultimately hasten something of a feeding frenzy, where several companies compete to try to snap up the last remaining scale, independent fiber asset out there (zayo)…Verizon, Comcast, Charter, Centurylink (post LVLT digestion)…Google?…a merged Sprint/T-Mobile?…many could enter the fray.
Why would they aquire Zayo which has identical footprint to Lightower? they would of bout Zayo straight away rather than have duplicate networks.
Zayo has a much larger network than Lightower, especially outside of the northeast.
ok so I ask again, why didn’t they just buy Zayo? why would they spend 7 billion on LT , then go ahead and spend much much more on Zayo when Zayo overlaps Lightower. they would of just bought Zayo
You act as if Crown can buy any company it wants to without regard for the real world dynamics of how deals come together. Lightower was actively for sale. Their private equity investors were ready to monetize their investment and began speaking with a long list of potential buyers this spring. By all accounts, Zayo is not for sale today. Indeed selling right now given some of the issues they are facing would seem to be a poor choice.
Second, buying Zayo after already buying Lightower makes sense for the same reason that merging Zayo and LT would have made all the sense in the world. First of all, there are large areas of the country where there is no overlap. Second, overlap is very far from being a bad thing. Overlap => duplicative cost structures that can be eliminated post merger, i.e. cost synergies. Broadly speaking, business overlap/cost synergies are by far the largest driver of value creation in horizontal mergers.
What issues is Zayo facing?
Seems hefty for a good tuck-in. There won’t be a bidding war at that $$$