Acquisition-hungry Zayo Group has agreed to purchase AboveNet for about $2.2 billion in a pact that will create a company focused on offering fiber-based communications services to enterprises, government and carrier customers, the companies announced Monday.
Louisville, Colo.-based Zayo Group said it plans to pay $84.00 per share in cash for White Plains, N.Y.-based AboveNet in what reflects a 21 percent premium over AboveNet’s average closing.
“Over the last 5 years Zayo has acquired a very impressive set of fiber infrastructure assets,” said Bill LaPerch, president and CEO of AboveNet, in a statement. “The combination of AboveNet’s and Zayo’s assets creates a dense fiber footprint throughout North America and Europe for a bandwidth hungry world. This new company will be uniquely qualified to meet the expanding needs of enterprise and carrier customers.”
There’s a caveat that could ruin the deal for privately held Zayo Group; AboveNet has a right under the agreement to solicit and enter into discussions concerning alternative proposals until April 17, 2012. The “go-shop” provision can be extended through May 2, 2012, under certain circumstances.
“There can be no assurance that this process will result in a superior proposal, and the definitive agreement provides Zayo certain rights to match any such proposal,” the companies revealed. “AboveNet does not intend to disclose developments with respect to the solicitation process unless and until its Board of Directors has made a decision with respect to any alternative proposals it receives.”
AboveNet and Zayo expect the acquisition to close in the middle of this year.
Helping to fund the deal, Chicago-based private equity firm GTCR is making an equity investment in Zayo. Charlesbank Capital Partners, a current investor in Zayo, also is sinking more money into the company. Zayo also has received commitments for debt financing from Barclays and Morgan Stanley Senior Funding Inc.
Zayo has been growing steadily through a number of acquisitions.
Earlier this year, Zayo announced that its zColo business acquired MarquisNet’s 28,000-square foot data center in Las Vegas. The acquisition was Zayo’s 18th acquisition of a company since its inception about four years earlier. Late last year, Zayo completed its largest acquisition by acquiring 360Networks under a deal that the company said would create a bandwidth infrastructure provider with estimated annual pro forma revenues of $393 million.
Zayo’s purchase of AboveNet is expected to more than double the size of the company based on revenues. In 2011, AboveNet earned a profit of $72.7 million on revenues of $472.5 million.
The announcement pumped up AboveNet’s stock price. Shares of the company (symbol: ABVT) were up 13.06 percent, or $9.70, on the New York Stock Exchange as of 2:18 p.m. ET.