At the end of last week, Zayo announced plans to get a bit smaller. The Boulder-based infrastructure provider has agreed to sell Scott-Rice Telephone Co. to New Ulm Telecom, Inc.
Scott-Rice is an ILEC operating in Minnesota to the south of Minneapolis in the markets of Prior Lake, Lakeville and Elko. It had previously been part of Electric Lightwave, and I guess probably Integra before that, and has been managed out of the Allstream business since Zayo acquired that.
For its part, New Ulm Telecom is also an independent rural ILEC operating in the region southwast of Minneapolis. For them the deal adds new, adjacent territories with which they will probably find some decent synergies. This is their second such deal, following the purchase of RRCNet a few months ago.
The deal is worth $42M, and covers annual revenue of about $15M with EBITDA of $10M, and closing is expected in the second quarter of this year.
We have been expecting Zayo to sell off the non-core pieces of Allstream and Electric Lightwave for a while now, and this looks like the first step along that path. In the past they have tended to spin off pieces that didn't fit rather than sell them, but the idea is the same.