EQT, Digital Colony to Buy Zayo

May 8th, 2019 by · 18 Comments

Well, as we have all been anticipating for the last five months or so, Zayo will soon no longer be a public company. Today they announced a definitive agreement to be acquired by Digital Colony and EQT.

The deal will pay Zayo's shareholders $35 per share, valuing the company at $14.3B. That's about where the rumors had it, but Zayo's stock was still trading about 15% below those levels as of yesterday so I guess the markets had some doubts that it would go down this way.

When Zayo's stock price suffered last year after operational stumbles, the vast difference between private and public valuations of assets like Zayo became impossible to ignore. It became clear that private bidders would emerge simply because they would be happier with the assets and future potential than the public markets will be any time soon.  Thus began a dance that both sides wanted to finish, and so they did.

For EQT, this is the infrastructure fund's biggest move yet into this space. They assembled Segra from the acquisitions of Lumos and Spirit of course, but the company also owns assets like IP Only and GlobalConnect over in Europe. Meanwhile Digital Colony, led by Marc Ganzi and combining the efforts of Digital Bridge and Colony Capital, is no stranger to the space either.  As ownership teams go, these guys definitely know what they're doing.

Now, though, the hard part begins. Zayo still needs to solve the operational issues that have impeded its growth lately. There is definitely discontent to deal with both internally and externally, and it should be interesting to watch how the new owners deal with it. Will they reshape the leadership team in some form?  Will they return to the M&A arena to further complement these assets?  Details are sparse in the announcement, and we have to wait for the deal to actually close anyway (1H 2020 expected), so only time will tell.  Speculation can start now though.

Zayo's assets today span some 130,000+ route miles of fiber connecting some 35,000 on-net locations, with 51 colocation facilities on two continents. The company also posted its fiscal Q3 numbers today, with revenues checking in at $647.2M, which appears to be a pretty good number.  EBITDA tipped the scales at $321.3M.  It'll take more time to delve into the details, but the M&A is the big news anyway.

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Categories: Fiber Networks · Mergers and Acquisitions

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18 Comments So Far


  • Anonymous says:

    Disappointing – $35 per share price. The assets, work, and sacrifice to date should have amounted to more than this.

    More Disappointing – Current leadership will remain in place. Dan, Jack, and others are the primary cause of Zayo’s failures. Leaving that toxic and out of touch team in place will only limit and prevent true growth and change post close.

    Most Disappointing – Dan and Jack will continue to push great employees out of the business due to either not being ‘yes men’ or living outside of Colorado or Oklahoma.

    Winners – Employees who have already been pushed out, or will be in the near term. Freedom to find a positive and fair career environment.

  • Good lord says:

    So Zayo is being purchased by the firm owned by Tom Barrack — the tax cheat, “friend” of Donald Trump, and greaser of wheels throughout the Middle East and Russia.

    Didn’t think working at the company could get worse? It apparently could — and you might be laboring to make faraway oligarchs rich.

  • Proud American says:

    ^^^TDS right there^^^

    Zayo being acquired is the best thing that could have happened to that company.

    • anonymous says:

      not if Caruso stays at the helm won’t matter

      • Anonymous says:

        Most important take away right here – DAN/JACK and Cronies need to GO. Otherwise? Nothing changes. Employees already hold vast animosity towards leadership – no way to right the ship without cleaning out the C-suite.

    • Politics aside says:

      Minus the TDS issue, this is the best thing to happen to Zayo. This will spur growth and Digital Colony and EQT have extensive experience running fiber/infrastructure companies. Still not sure what politics or a mistake over Khashoogi has to do with the purchase.

      • Good lord says:

        Allow me to explain. I’d be short on trust if my employer were always skating on the edge of what’s legal and had just left his wife for someone 33 years younger.

        And on a personal matter, I wouldn’t want to labor primarily for the benefit of the offshore bank accounts of Russian oligarchs, Saudi emirs, and a shameless American tax cheat.

    • John M. says:

      Totally agree with you Proud American. TDS is real and even shows up on Telecom Ramblings! Haha. But…but…but…I HEARD IT ON CNN!!! It has to be true!

  • John M. says:

    If the new owners of Zayo want to cure their operational issues they should contact Bill LaPerch, former CEO of Abovenet, and present him with a blank check to take over as CEO of Zayo.

  • Bernie Eats Brown Corn says:

    The only way Zayo improves is to release Caruso and his band of whackos. Bring in Morely &/or Erickson and other early folk who REALLY had vision.

  • Anonymous says:

    It’s so obvious to everyone internally that Dan and Jack are the issue, and just can’t believe new owners are that oblivious. Their performance should speak for itself. Gonna be interesting to see how many folks stick around given the sale really doesn’t benefit most employees with the estimated 12 month close. Now they can just payout bonuses at sub 100% while keeping stock st $35. Dan Caruso has sure played the markets to his favor however while taking advantage of his employees.

  • Bob says:

    Understand that sometimes the devil you know is better than the devil you DON’T know. If pricing goes up for wholesale capacity nationwide, the cost of ALL carriers will shoot up. Zayo may not be the best run company, but the fear of the unknown doesn’t usually help business plans.

  • Anonymous2 says:

    Please remove Dan Caruso and Jack “Crony” Waters (and just about everyone else from current exec “leadership”) from their positions. Maybe then Zayo can start getting somewhere.

    Thanks!

  • Depressed Employee says:

    How many underperforming quarters are these arrogant leaders allowed? Dan and Jack are a joke and so completely out of touch. Waters is embarrassing on the internal all hands calls. His total lack of emotional intelligence around his competency is baffling. And now they’ve built a team of his cronies that will never challenge them. This thing is going to implode if new owners don’t take decisive action quickly.

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