Is a Deal for Zayo Close? Very Possibly

April 12th, 2019 by · 14 Comments

The ongoing bidding for Zayo is now said to have come down to a single consortium of investment firms. According to Reuters this week, a group led by Digital Colony Partners LP, EQT AB, and Stonepeak Infrastructure partners is the last man standing.

The actual value of the deal on the table is not known, but said to value Zayo at $8-9B for the marketcap plus $5.9B in net debt. The stock price surged in response, however it’s still a ways below matching that buyout price rang so the market clearly isn’t sure things will go through.

But I’d say it’s pretty likely at this point, or at least more so than ever before. I think that Zayo’s foray into the public markets these past few years has not been the party they/we might have hoped. While private equity and wealth funds continue to pour money into infrastructure, public markets still put lower valuations on fiber and bandwidth and remain unimpressed about the short term results.

So while there is an element of fiduciary duty in fighting for the best price for shareholders, I think that Zayo’s management team has an incentive to take a deal when they do reach the threshold. They can then get back to the the main course of building out infrastructure with a longer term view.

The proposed leaders of the consortium (Digital Colony, EQT, Stonepeak) certainly know the space intimately already.  Of course, they’ll still have to figure out the answers to the operational issues that have limited Zayo’s growth over the last year or so.

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Categories: Fiber Networks · Mergers and Acquisitions · Metro fiber

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14 Comments So Far

  • anonymous says:

    there was another report saying the group doesnt include stonepeak and that another consortium party had dropped out so there’s a hole to fill which begs questions on the original reuters report and if zayo is really exclusive with an incomplete group that also hasnt secured its debt

  • Anonymous says:

    This is exactly the direction Zayo needs to go, period. Zayo is a sleeping giant, being public traded has crippled growth among other things. The future is bright in the private sector, VERY bright.

  • anonymous says:

    Being publicly traded has crippled growth? That’s comical. Read Glassdoor. But yes the direction it needs to go.

  • Anonymous says:

    Caruso needs to go. Waters and the other cronies as well. It’s not Wall Street that’s ‘crippling’ Zayo – it is poor leadership. Failure to recognize the technical talent that literally built the network, and ostracizing non-Denver/Boulder employees is what has ‘crippled’ them … those employees who haven’t been pushed out, pissed off, or departed on their own, have lost all faith in leadership. End of story.

  • Anonymous2 says:

    Dan Caruso and Jack Waters definitely need to be relieved of their “commands”. The majority of the employee base who don’t have their faces up those two’s butts have no confidence in them, or much of the other leadership.

    Let’s not forget to mention some more recent Zayo acquisitions with their cronies kept around and their good ol’ boy network that’s going on = unearned promotions and leadership positions FTW!

    • Anonymous says:

      Ouch. Talk about a brutal takedown.

      • Anonymous3 says:

        Nothing brutal about facts and honesty.

        • John M. says:

          I do agree with many of these comments but I do not think all the executive departures can be blamed on Caruso. Many of those execs simply cashed out when the company went public.
          Anyone who has worked for a company that has gone public has seen many executives depart shortly thereafter.

          • anonymous says:

            Perpetuated talking point. Name the companies where this has happened at this rate. This investor letter sticks a pin in it.

          • Half right says:

            Sure, it’s common to lose a lot of people after an IPO but Zayo has fared far worse.

            In the years leading up to the IPO, Dan and team used the lure of lucrative RSUs to hold onto top talent despite terrible working conditions (e.g., crazy hours, the malign influence of a few tyrannical yes-people). This papered over significant leadership shortcomings, making the executive and board teams blind to the shortcomings of how the company was being run, including how its people were being treated.

            Zayo’s IPO didn’t just make its top execs rich — many managers and even star individual contributors cashed in to the tune of hundreds of thousands or millions of dollars. Once they could leave, they did — thinning the ranks of its best people up and down the company. When people at the top left, no one was ready to come up from behind to take their place.

            • Anonymous says:

              exodus happens post-IPO when the executive team has no confidence in its success. Who wouldn’t take their winnings and go home if you knew they would be lost otherwise?

            • Anonymous says:

              There were plenty of high performing folks to fill the ranks – however, they either weren’t ‘yes men’, didn’t want to move to Colorado (there are over 100 offices – why must everyone be in Boulder?), lacked enough confidence in Executive Leadership to uproot families and move to CO (with good reason – as it looks like a sale is imminent), or simply wanted to maintain as much distance between the tyrant-king CEO and themselves as possible.

              Once again, the old school mentality of ‘we must see you in the office’ shines through. Once might expect a Telecom to be first in line to embrace Tele-work … but this is not the case with Dan and his cronies.

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