One of the few M&A rumors of 2017 that hadn't come true did so this morning. Birch Communications has found a buyer for the vast majority of its business and assets. The cloud services provider Fusion has entered into a definitive agreement to acquire the Birch's cloud and business services units.
The combined company will have approximately $575M in annual revenues, and anticipates adjusted EBITDA of $150M after anticipated synergies. The assets will span 31,000 route miles of network with metro assets in 11 major markets and 30 data centers, and will serve over 150K business customers.
For Birch, this marks the end of a long string of consolidation moves of its own. The company made several dozen acquisitions along the way, culminating in the purchase of Cbeyond a few years ago. That purchase may have been a bit too much, as Birch struggled to bring it all together. Birch will keep its consumer and single line businesses, although I suspect the other shoe will drop at some point with what's left.
Now it will be Fusion's turn, and for Fusion, this is no small deal. With a current marketcap of $47M, this all stock purchase will see them issue 73 million common shares. The price tag is said to be 5 times adjusted EBITDA after synergies of $20M. In addition to stock valued at about $280M, Fusion will also assume and refinance Birch's $458M debt. The deal is expected to close by the end of 2017.