EQT, Digital Colony to buy Colorado fibre operator in $14bn deal

EQT and digital infrastructure investor Digital Colony are set to take over a US fibre provider.

The two companies have entered into a definitive agreement to acquire Zayo, a listed Colorado-based fibre network operator, in a deal worth US$14.3 billion (£10.9bn €12.7bn). The deal marks the largest transaction that EQT – which also has a private equity arm – has carried out to date.

The offer will see Digital Colony and EQT – the latter of which is investing out of its fourth infrastructure fund – pay US$35 per share in Zayo, representing a premium of 32% over the weighted average stock price over the previous six months.

Zayo is the largest independent fibre network operator in the US and currently controls a fibre network of over 130,000 miles in North America and Europe.

The sale is still subject to regulatory approvals and is expected to close in the first half of 2020.

In early March [2019], one of Zayo’s largest shareholders, Starboard Value (circa 4%), issued a letter to Zayo’s CEO, lamenting what it described as poor shareholder returns relative to the company’s potential.

“[A] combination of management turnover, poor operating performance and confusing strategies changes have contributed to a steep decline in Zayo’s share price,” said Starboard in the letter.

Skadden Arps acted as legal adviser for Zayo on the deal, while Goldman Sachs and JP Morgan were both financial advisers. The buyers, for their part, were advised by Simpson Thatcher (legal) and Morgan Stanley and Deutsche Bank (both financial).

For Digital Colony, the Zayo deal is the third acquisition announced in two weeks. It follows the company’s recent deals to acquire UK-based small cell technology provided iWireless, as well as Canadian fibre and data centre operator Cogeco Peer 1.

EQT, for its part, is continuing to deploy capital out of its recently closed EQT Infrastructure IV vehicle, which reached final close in March [2019] at its €9 billion (£7.6bn US$10bn) hard cap, making it the largest fund of its kind in Europe.

 

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