Market Overview

ZayoGroup to Buy AboveNet for $2.2 Billion


Fiber-optic networks operator AboveNet (NASDAQ: ABVT) has agreed to be bought by Zayo Group for $2.2 billion after failing to find a buyer last year.

According to Bloomberg, the cash offer is for $84 per share, 13% move than ABVT's Friday closing price.

The Colorado-based Zayo Group is looking to expand its fiber network in North America and Europe, and this acquisition will see the company make serious headway towards achieving that aim. This agreement comes on the back of ABVT failing to attract a bid over $80 per share in 2011. When considering that, this deal must be a huge relief for AboveNet, following what must have been a long and arduous search.

Following the news, ABVT moved up 14% to $84.28 just before 9 a.m. EST. Prior to that, the company had gained 17% in total since May 23.

There is historical significance here too, as this deal would be the biggest U.S. acquisition in the Internet connection services industry ever.

The sales figure sees Zayo paying roughly 11 times earnings before interest, taxes, depreciation and amortization.

According to ABVT CEO William Laperch, the company's customers include brokerage houses, investment banks, Web companies and health-care providers.

In a research report published on Monday, Oppenheimer said that ABVT has been for sale for the last year, so this transaction is not a surprise. The cash bid is 9x estimated 2012 EBITDA (ABVT probably could have gotten 10x if they held out, but their major investors have been in the stock for almost a decade). ABVT's value is in its local fiber in major cities globally.

“We believe Zayo is getting a good deal and is striking before it has to enter into a bidding war with LVLT or CTL, both of which will be preoccupied with merger integration for the rest of the year and need stock to do a deal. Zayo has developed into arguably the premier operator of local-exchanges assets in the U.S. It focuses on owning and operating relatively unique assets. ABVT can shop the transaction around for a month, but we see other bidders as unlikely.”

Oppenheimer also stated that AboveNet agreed to be acquired by Zayo Group LLC for $2.2B in cash ($84/share—a 13% premium). Zayo has received commitments for debt financing that together with equity commitments from GTCR and Charlesbank Capital Partners will allow the company to consummate the acquisition and repay or refinance certain existing indebtedness of Zayo and AboveNet. “The transaction values ABVT at about 9x EV/EBITDA (based on 2012 consensus EBITDA), in line with multiples seen in prior fiber transactions in the 8-10x range.”

Posted-In: OppenheimerNews M&A Analyst Ratings Tech Best of Benzinga


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