Zayo ‘rejects’ $7bn private equity bid for company

12 February 2019 | Alan Burkitt-Gray

Cover

Zayo has turned down an acquisition offer from a private equity investor, and a hedge fund has urged CEO Don Caruso to sell the company, according to a number of reports.

The Reuters news agency is reporting this morning that Sachem Head Capital Management, described as an activist hedge fund, has written to Caruso (pictured) “urging it to explore a sale”. Reuters cites “people familiar with the matter”, but does not name its sources.

The agency and the New York Post are both reporting that Zayo has turned down a bid from Blackstone Group, the private equity investor.

The reports say Blackstone and other members of a consortium offered $30 a share, compared with Zayo’s current price of $25.51. Zayo’s market cap at its current price is a shade under $6 billion, implying the Blackstone bid values it at just over $7 billion.

Capacity asked Zayo for a comment. A spokeswoman emailed: “Thanks for reaching out. We decline to comment.” 

If the reports are accurate, Zayo’s valuation has dropped in four weeks, when Capacity reported that CTFM, a US website that follows bids and deals, was saying Zayo had turned down a bid for “more than $30 a share”. Zayo’s share price was then $25.70.

Reuters says that Blackstone’s partners in the consortium are Stonepeak, KKR, Charlesbank, GTCR, and I Squared Capital (ISQ), which owns HGC Global Communications.

The New York Post says that the consortium “made a binding offer” for the company “after conducting due diligence”, and confirms that this latest offer was lower than the non-binding offer in January.

In late January Nick Del Deo of MoffettNathanson said that “CenturyLink would be a more logical partner” than other potential bidders. 

Zayo’s share price has dropped from $37.90 in late August 2018 and hit a low of $20.46 in late December before climbing again to $25 or so.