EQT and Digital Colony Agree to Buy Zayo for Over $8 Billion

Gillian Tan and Nabila Ahmed (Bloomberg) -- Fiber network owner Zayo Group Holdings Inc. has agreed to be acquired by Digital Colony Partners and EQT Partners for more than $8 billion in a deal that will take the fiber-network owner private.

The buyers will pay $35 per share in cash and take on $5.9 billion in debt, Zayo said in a statement Wednesday, confirming an earlier Bloomberg report. The transaction values Zayo’s equity at $8.2 billion, based on the number of Zayo’s outstanding shares at March 31.

The offer represents a 14.3 percent premium to the Boulder, Colorado-based firm’s closing price on Tuesday. Its shares rose 8.2 percent to $33.14 at 9:43 a.m. in New York trading.

Zayo, led by Chief Executive Officer Dan Caruso, has been under pressure from activist investors including Starboard Value and Sachem Head Capital Management.

After peaking at $39.35 last July, Zayo shares tumbled as low as $20.46 as the company struggled through organizational changes and concerns that the market for fiber lines was becoming overcrowded. The shares began to rebound late last year on news that a sale was in the works. In March, it announced that it was evaluating strategic alternatives.

"I am confident this partnership with EQT and Digital Colony will empower Zayo to accelerate its growth and strengthen its industry leadership,” Caruso said in the statement.

Digital Colony is a communications infrastructure-focused investment firm formed as a partnership between Tom Barrack’s Colony Capital and Marc Ganzi’s Digital Bridge Holdings LLC.

EQT, a Stockholm-based investment firm, raised 9 billion euros ($10.1 billion) for its latest infrastructure fund this year, targeting opportunities in Europe and North America. The deal is the largest transaction EQT has announced in its 25-year history.

The transaction is scheduled to close in the first half of 2020, pending regulatory clearance and approval by Zayo shareholders.

Goldman Sachs Group Inc. and JP Morgan Chase & Co. are advising Zayo on the deal while Morgan Stanley and Deutsche Bank AG are advising Digital Colony and EQT.