Zayo waits for next week’s bids that could value it at $9 billion

05 April 2019 | Alan Burkitt-Gray

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Reports from the US say that bids for Zayo are due in next Friday, 12 April, with prices quoted as $32-$34 a share, valuing the company at almost $9 billion.

According to the reports, all of which are unconfirmed, “at least four” bids are expected for the company, which last month said it was “actively considering and evaluating opportunities to enhance shareholder value, including an assessment of the company’s strategic priorities and opportunities, such as potential partnerships, business combinations and other transactions”.

In January it turned down a bid said to be “more than $30 a share”, well above the then share price of $25.70. That bid would have valued Zayo at $8 billion.

But Zayo changed its stance after criticism from a major shareholder – leading to the March statement that it is “evaluating opportunities”.

Since then bid fever has pushed the share price up to $29.48, though that is still well below the peak price for the last 12 months of around $40 – though the lowest price has been around $20.

Sources, again unconfirmed, say that the company “could be sold whole or in part” – but that could mean selling a stake in the group or a revival of the previous plan, now abandoned, to split it into a services company and an infrastructure company.

However, some of the comments have been clearly uninformed about the telecoms infrastructure industry. One commentator, on the Seeking Alpha site, said EQT was part of one consortium, but linked the reference to a US hydrocarbon exploration and pipeline transport company, rather than the Swedish EQT Partners, which in 2017 bought Virginia fibre carrier and data centre operator Lumos Networks for $950 million. That EQT spent $258 million on buying Norwegian fibre operator Hafslund Fibernett at the end of 2010.

Seeking Alpha named EQT – but likely the wrong one – as being in a consortium to bid for Zayo with the Ontario Municipal Employees Retirement System and Digital Colony, a private-equity investor that specialises in telecoms infrastructure. The managing partner of Digital Colony is Marc Ganzi, who has spoken at Capacity events such as Metro Connect. He told Capacity: "We have no comment around Zayo today.  Apologies."

In February 2019 Digital Colony reached a definitive agreement with Cogeco Communications to acquire Toronto-based Cogeco Peer 1, a provider of colocation, network connectivity and managed services, for $574 million.