Colorado-based Zayo Group Holdings Inc. (NYSE: ZAYO) said it agreed to acquire Vancouver, Washington-based Electric Lightwave, formerly known as Integra Telecom, the largest owned and operated fiber-based provider in the West, for $1.42 billion in cash. The purchase price represents a multiple of less than 8x LQA EBITDA of $180 million.
Zayo provides communications infrastructure services, including fiber and bandwidth connectivity, colocation and cloud services to the world’s leading businesses.
Electric Lightwave, which provides infrastructure and telecom services primarily in the Western United States, has 8,100 route miles of long haul fiber and 4,000 miles of dense metro fiber in Portland, Seattle, Sacramento, San Francisco, San Jose, Salt Lake City, Spokane and Boise, with on-net connectivity to more than 3,100 enterprise buildings and 100 data centers.
Approximately 40 percent of Electric Lightwave’s existing revenue aligns with Zayo’s infrastructure-focused business segments and will be rapidly integrated into the core Zayo organization, processes and systems. The remainder, which is a valuable and viable cash-flow generating business, has a customer base that aligns well with Zayo’s Canadian SME and voice businesses.
“Electric Lightwave provides us another unique and dense regional fiber network that advances our position as the only national independent infrastructure provider remaining in the U.S.,” said Zayo’s chairman and CEO Dan Caruso.
Zayo expects to achieve significant revenue and cost synergies over the coming quarters, driven by the efficiencies of scale and achieved via Zayo’s proven, streamlined integration process. Zayo’s Tranzact platform and Salesforce.com implementation will provide seamless online access to viewing, purchasing and managing the combined customers and network.
Zayo also anticipates more than $40 million in annual cost synergies to be realized throughout the integration process and will benefit from more than $400 million in net operating loss carryforwards acquired in the transaction.
The deal is expected to close in the first quarter of 2017, subject to customary regulatory approvals and closing conditions. The transaction will be funded with a combination of cash on hand and debt.
Gibson Dunn & Crutcher LLP served as legal advisor to Zayo on the transaction. Latham & Watkins and Gray Plant Mooty served as legal advisors to Electric Lightwave.