Zayo Is Said to Attract Blackstone-Stonepeak Group Interest

Gillian Tan, Kiel Porter and Nabila Ahmed (Bloomberg) -- Zayo Group Holdings Inc. attracted takeover interest from a group of investors including funds managed by Blackstone Group LP and Stonepeak Partners LP, according to people with knowledge of the matter.

Funds managed by KKR & Co., I Squared Capital, GTCR and Charlesbank Capital Partners are also part of the group that has expressed interest in a take-private deal for Zayo, said the people, who asked not to be identified because the details aren’t public. Shares surged as much as 20 percent in New York Monday and were up 14.3 percent to $27.05 apiece at 9:46 a.m., valuing the company at $6.4 billion.

There’s no guarantee a deal will be reached and the company, which operates an almost 130,000-mile fiber network across North America and Europe, is currently focused on its announced plan to split into two parts, two of the people said.

Representatives for Zayo, KKR, Stonepeak and Blackstone declined to comment. Representatives for I Squared, GTCR and Charlesbank didn’t respond to requests for comment.

Shares jumped on Friday after Cowen & Co. analyst Colby Synesael wrote in a note to clients that a takeout offer was likely. Including debt, the company is valued at about $11.1 billion, according to data compiled by Bloomberg.

Zayo, which went public in 2014, announced on Nov. 7 that it plans to separate itself into two publicly traded companies -- one focused on communications infrastructure and the other on enterprise services. Daniel Caruso, the CEO, co-founder and chairman, is slated to lead the infrastructure group, which may later convert to a real estate investment trust structure for tax purposes, Zayo said. He owns 8.6 million shares or 3.6 percent of the company, according to data compiled by Bloomberg.

As it announced the split on Nov. 7, the company also disclosed third-quarter earnings that fell below analyst expectations. Its shares had fallen 22 percent since then and were down 36 percent for the year through Friday.

Activist investment firm Jana Partners LLC owns 1.7 million shares, or 0.7 percent of Zayo. Jana reduced its position in the company by about 415,000 shares during the quarter ended Sept. 30, according to data compiled by Bloomberg.