The Creation of a Leader
The idea for Zayo Group was formulated with the early 2006 sale of ICG Communications in which Dan Caruso and a group of private equity investors capped off a 25x-plus return on the take-private and turnaround of the fiber-based provider. The group recognized that the fiber sector had hit an inflection point as bandwidth demand had caught up with the excess supply created in the early 2000’s. Zayo was formed in late 2006 with the purpose of creating value for its shareholders by applying efficiency, scale and growth to undervalued regional fiber companies in a focused consolidation towards providing national Bandwidth Infrastructure services. After 6 years, 21 acquisitions and substantial follow-on organic growth, Zayo is now the leading player in the Bandwidth Infrastructure space as evidenced by its impressive set of infrastructure assets, margin expansion and consistent track record of value creation.
Zayo's Recent Events
Zayo has transitioned the North American headquarters from Louisville to Boulder, Colorado. Please note this new address in your correspondence:
1805 29th Street, Suite 2050
Boulder, Colorado 80301
2012 has been a transformative year for Zayo, driven primarily by the recently completed $2.2 billion acquisition of AboveNet which combined to create a dominant set of metro and intercity fiber assets in North America and Europe. The transaction closed on July 2nd in conjunction with $472 million of new equity investment and $2.87 billion of new debt. Strong demand from both equity and debt investors resulted in an upsizing from the original amounts which will help fund the acquisitions of FiberGate, USCarrier, and First Telecom Services (pending), as well as provide capital for further organic and inorganic growth opportunities.
Zayo's Acquisition and Financing History
On July 2, 2012, Zayo Group completed the financing of $3.3 billion in equity and debt in conjunction with the close of its acquisition of AboveNet and the refinancing of all current Zayo and AboveNet debt. The funding consisted of $472 million in equity and $2.87 billion of new debt plus, a new $225 million revolving credit facility which remains undrawn. GTCR LLC, a leading Chicago-based private equity firm, led the Series C round of equity financing. Several existing investors also made incremental investments. The debt includes a $1.62 billion term loan due in 2019, $750 million of 8.125% Senior Secured First-Priority Notes due in 2017, and $500 million of 10.125% Senior Unsecured Notes due in 2020. Earlier, in May of this year, Zayo announced it had completed its transaction to purchase Arialink, bolstering its fiber networks in the Lansing and Ann Arbor, Michigan areas. Zayo also announced in June that it had executed a definitive agreement to acquire FiberGate, Inc., adding 130,000 fiber miles to Zayo’s metro network in and around the greater Washington D.C. area. Zayo announced the acquisition of USCarrier in August and closed the deal in October. Later in October, the company announced the acquisition of First Telecom Services.
In December of 2011, Zayo Group announced that it had completed its latest round of debt fund raising totaling $315 million in a five-year term loan. The loan was marketed by RBC Capital Markets, Barclays Capital and SunTrust and allocated to 25 institutional investors. Initially marketed for $295 million, strong demand for the instrument led to upsizing the amount. The funds were used to complete the announced $345 million acquisition of 360networks, with the remainder of the purchase price and transaction expense funded by cash on hand. The 360networks acquisition was transformative in that it tied together Zayo’s unique western metro markets to create a nationwide fiber network. At the end of 2011, Zayo acquired the MarquisNet data-center business in Las Vegas, complementing its robust Las Vegas fiber network.
In March of 2010, Zayo Group issued $250 million in first lien senior secured notes in anticipation of its acquisition of AGL Networks. A portion of the proceeds were used to repay all outstanding amounts under the company’s former credit agreements. Morgan Stanley and Royal Bank of Canada were joint book-running managers on the offering while Barclays, Oppenheimer and SunTrust Robinson Humphreys served as co-managers. The Notes were issued to pay at an interest rate of 10.25% and mature in 2017. In September 2010, Zayo completed $100 million tack-on to the $250 million Senior Secured Notes. The company used a portion of the proceeds to fund the acquisition of American Fiber Solutions. Additionally in 2010, Zayo acquired Dolphini’s Cummins Station data center and colocation services, bringing the total number of acquisitions to date to fifteen.
In March of 2009, Zayo Group announced a total of $128 million of new equity had been raised in its Series B round of equity financing. The first closing of the round was announced on February 12th, with Charlesbank Capital Partners leading the round in addition to all of Zayo’s existing equity investors increasing their investment in the company. Morgan Stanley Alternative Investment Partners (Morgan Stanley AIP) joined to round out the total. At this time, Zayo’s equity syndicate consisted of Battery Ventures, Centennial Ventures, Charlesbank Capital Partners, Columbia Capital, MC Partners, Morgan Stanley AIP, and Oak Investment Partners. In September of 2009, Zayo announced an additional debt raise of $30 million. CoBank, Royal Bank of Canada and SunTrust acted as financial advisors and provided the debt capital in the form of a term loan. The financing was used to partially fund Zayo’s acquisition of FiberNet Telecom Group, Inc.
In March of 2008, Zayo Group closed on $30 million in debt financing, once again led by CIT with support from CoBank and Hercules Technology Growth Capital, Inc. The incremental debt allowed for the company’s acquisition of Citynet Fiber Network (CFN), the wholesale division of integrated communications provider, Citynet. This increased the total debt facility raised by Zayo to $115 million to date. In October of 2008, Zayo locked in on a $35 million debt facility, maintaining its ability to secure debt financing in a tumultuous economy. The new funding provided for the finalization of previously announced agreements to acquire Columbia Fiber Solutions, select assets of Adesta Communications, multiple fiber networks from Citynet and Northwest Telephone (in two transactions over 2008 and 2009). The addition of those three, and that of select assets of CenturyTel in July of that year, brought Zayo’s acquisitions count to nine by the end of 2008. To date, Zayo’s network spanned 19,645 miles, serving 1,650 on-net locations in 128 markets across 23 states. The incremental term debt would also allow Zayo to fund future mergers and acquisitions, while increasing its capital program in 2009.
In August of 2007, Zayo Group held its Series A Round of investing and raised $225 million in private equity funding led by Oak Investment Partners, Columbia Capital and MC Partners. Other investors included Colorado-based Centennial Ventures and Battery Ventures. Later that year, Zayo secured an $85 million debt facility in a round of financing led by CIT Group Inc. Also involved were CoBank and Hercules Technology Growth Capital, Inc. as co-sponsors of the facility. The funding, coupled with the $225 million raised earlier in the year provided Zayo sufficient capital to support its overall growth strategy and acquisitions of fiber-based communication businesses. By the end of the year 2007, Zayo had made five acquisitions: Memphis Networx, PPL Telcom, Indiana Fiber Works, VoicePipe and Onvoy Inc.