Zayo Group Holdings, Inc. (NYSE: ZAYO) has announced its latest acquisition target, Western U.S. fiber-optic network services provider Electric Lightwave. Zayo will pay $1.42 billion in cash for the company, which will add 8,100 route miles of long-haul fiber and 4,000 miles of dense metro fiber to Zayo's footprint.
Electric Lightwave recently spun out of Integra Telecom Holdings, Inc. (see "Integra spins out Electric Lightwave"). It operates in such markets as Portland, Seattle, Sacramento, San Francisco, San Jose, Salt Lake City, Spokane, and Boise. It offers on-net connectivity to more than 3,100 enterprise buildings and 100 data centers.
Zayo believes that about 40% of Electric Lightwave's existing revenue aligns with the acquirer's infrastructure-focused business segments. Zayo says the rest will complement the company's Canadian small-to-medium enterprise 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 Dan Caruso, chairman and CEO, Zayo. "Electric Lightwave has both strong metro fiber assets in key West Coast markets and capacity and routes that will augment Zayo's intercity footprint."
Zayo says the purchase price, which will come from a combination of cash on hand and debt, represents a "pre-synergized" multiple of less than 8X LQA EBITDA of $180 million. The company expects to achieve more than $40 million in annual cost synergies; it also will acquire more than $400 million in net operating loss carryforwards. Zayo expects to close the deal in the first calendar quarter of 2017, subject to customary regulatory approvals and closing conditions.
Zayo has made significant use of mergers and acquisitions as an expansion tool, with buys of Viatel, Latisys, and Allstream recent examples.
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