Zayo Group is expanding its fibre-optic empire further, this time with a definitive agreement to buy privately-owned telecommunications provider Spread Networks for $127 million in cash.
This will be Zayo’s 43rd acquisition since it was founded ten years ago (see Lighting up the metro dark fibre opportunity). And it’s pocket change compared to some of the deals that the company has done, such as that for US West Coast provider Electric Lightwave, which closed earlier this year (see Zayo to buy Electric Lightwave for $1.42 billion).
This latest acquisition will provide Zayo with a critical 825-mile, high-fibre-count route connecting New York and Chicago. Built, owned and operated by Spread Networks since 2010, the route offers the lowest latency and most direct fibre route between the two cities. The route is a particularly important for financial services customers who have trading operations in the key financial markets of New York and Chicago.
“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 centres of finance and commerce. Given the relative simplicity of the business, this will be a straightforward integration with meaningful, near-term synergies.”
Zayo expects the acquisition will provide $10.5 million in annualized earnings (EBTIDA) by the 30 September 2018 quarter – a higher value than it generates currently, via a combination of cost synergies and anticipated organic growth.
When the new assets are combined with Zayo’s existing fibre routes from Seattle to Chicago and San Francisco to Chicago, it will create a low-latency coast to coast network that will be attractive to many industry verticals including content, media and cloud providers, the company said.
Zayo also plans to use the acquired assets to provide a complete low-latency wavelength route from Seattle to New York. Traffic to and from Asia, which connects through cable landing stations in the Pacific Northwest, will also be express connected to the East Coast via the new, combined routes.
The route, which currently serves more than 60 customers, has “ample capacity for new customers”, the company said. Of the 432 fibres available on the route, less than 25 per cent are utilised today and Zayo will have the right to install more cables and use additional conduit for new fibres.
The deal is expected to close in the first calendar quarter of 2018, subject to customary closing conditions.