Zayo Group Holdings, Inc. (NYSE: ZAYO) will expand via acquisition again, this time via an agreement to buy Spread Networks for $127 million in cash. Privately held Spread Networks owns and operates an 825-mile, high-fiber count long-haul fiber-optic network between New York and Chicago it launched in 2010 (see "Spread Networks to debut low latency New York to Chicago dark fiber route"). Zayo expects to close the deal, which will use cash on hand, in the first calendar quarter of 2018.
The Spread Network fiber network comprises 432 fibers, less than 25% of which are in use, Zayo claims. The fiber cables connect 755 Secaucus Rd. in Secaucus, NJ, and 1400 Federal Blvd. in Carteret, NJ, (see "Spread Networks connects Carteret and Equinix Data Center in Secaucus with low-latency fiber network") to 350 Cermak Rd. in Chicago, IL.
Zayo plans to connect the network with its existing Seattle to Chicago and San Francisco to Chicago routes to create a coast-to-coast fiber network. In addition to financial companies, Zayo expects such a route to find appeal among content, media and cloud providers, as well as carry traffic to and from Asia. Spread Networks currently has more than 60 customers on its network, Zayo says.
"Spread constructed this route to provide the fastest possible speed on the shortest possible route," said Jack Waters, CTO and president of Fiber Solutions at Zayo. "This asset is an outstanding complement to our existing network, providing customers with low-latency options to and from the country's leading centers of finance and commerce. Given the relative simplicity of the business, this will be a straightforward integration with meaningful, near-term synergies."
Along these lines, Zayo says Spread Networks is expected to generate $22.8 million in annualized revenue and $7.5 million in annualized EBITDA by the end of the current quarter, which concludes December 31. Zayo expects to reach $10.5 million in annualized EBITDA from the acquisition by the September 30, 2018 quarter through cost synergies and organic growth.
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