Zayo Group to acquire AboveNet

Zayo Group, LLC has announced its plans to acquire fellow communications services provider AboveNet, Inc. (NYSE: ABVT) for approximately $2.2 billion. The boards of both companies have approved the agreement, Zayo and Abovenet say.

Under the terms of the agreement, each share of AboveNet common stock issued and outstanding immediately prior to the transaction will be entitled to receive $84.00 per share in cash, representing a 13% premium over AboveNet's closing price on March 16, 2012 and a 21% premium over the average closing stock price for the past 60 days.

"AboveNet and Zayo's business models are closely aligned with a disciplined focus on high-bandwidth fiber-based communications services for enterprises, government and carrier customers," said Dan Caruso, president and CEO of Zayo Group. "We have admired AboveNet's business model and results and believe the combination will create value for customers, employees and investors."

"Over the last 5 years Zayo has acquired a very impressive set of fiber infrastructure assets," said Bill LaPerch, president and CEO of AboveNet. "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."

As part of the transaction, GTCR, a leading Chicago-based private equity firm, will make an equity investment in Zayo. "We have been looking for opportunities to make investments in the bandwidth infrastructure space and believe the exceptional leadership and assets of the combined company creates an excellent opportunity for our firm," said Phil Canfield, principal at GTCR. In addition to GTCR's new investment, Charlesbank Capital Partners, a current Zayo investor, will make an additional investment in the company.

This transaction is not subject to any financing conditions. Morgan Stanley Senior Funding, Inc. and Barclays have committed to provide Zayo Group, LLC with sufficient committed debt financing that together with equity commitments from GTCR and Charlesbank Capital Partners will allow Zayo to consummate the acquisition and repay or refinance certain existing indebtedness of Zayo and AboveNet.

The definitive agreement contains a 30-day "go-shop" provision, which enables AboveNet see if it can find a better deal by April 17, 2012, with a potential extension to May 2, 2012 “under certain circumstances.” The companies did not say whether Zayo will be given any compensation should a better deal be found, but the company does have certain rights to match any new proposals.

J.P. Morgan acted as lead financial advisor to AboveNet with Moelis & Company LLC acting as co-advisor. Moelis & Company LLC will lead the go-shop process with J.P. Morgan acting as co-advisor. Wiggin and Dana LLP is serving as AboveNet's legal advisor. Willkie Farr & Gallagher LLP is serving as legal counsel to AboveNet's Board of Directors.

Latham & Watkins LLP and Gibson Dunn & Crutcher LLP are serving as GTCR's and Zayo's legal advisors, respectively.

The transaction, subject to customary approvals, is expected to close in mid 2012.