Northeastern regional fiber operator Lightower is taking consolidation into its own hands, and will today announce the purchase of Veroxity Technology Partners. [edit: here’s the PR] The news began to break yesterday with an anonymous comment posted here in Telecom Ramblings which has turned out to be right on target. Strategically, Lightower’s move is a rather easy one to justify, as the network assets are quite complementary.
The Veroxity purchase will add some 2000 route miles to Lightower’s total footprint, with the most important parts being the metro fiber loops in central Boston and around the 128 corridor and in Connecticut. Both fill in holes in Lightower’s New England coverage, giving them a more comprehensive portfolio throughout the region. In addition to the fiber itself, the purchase will add some 190 on-net buildings to Lightower’s total, bringing the company close to the 2K mark. There is also a national longhaul ring which I am curious what they might do with down the line.
In terms of customer focus, Veroxity tends toward the enterprise space especially in the financial vertical. That fits well with Lightower’s moves of late, which have been expanding its traditional wholesale focus to include large financial and enterprise customers.
Financial details were not disclosed, and since both companies are privately held I expected nothing less. However, I’d be interested if anyone out there has heard what sort of EBITDA multiple Veroxity sold for.
Is Lightower done or are there more acquisitions to come? There are several more fiber properties in the region that are known to be for sale, including Fibertech and NSTAR, and with RCN Metro falling into the hands of private equity nearly all the competitive fiber in New England seems to be up for grabs this year.
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Categories: Mergers and Acquisitions · Metro fiber
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Rob, this looks like an all stock deal. Veroxity shareholders will get 14.3 percent of Lightower stock to complete the purchase. What’s the valuation of Lightower? I wonder if we can figure out the multiple of EBITDA from those numbers or from any other information.
Hmmm, unfortunately I don’t have that number either. Interesting though to hear it was a stock deal. Thanks for the datapoint, maybe others will chime in with complementary ones.
For the Veroxity employees that were gifted shared in Veroxity (back from the says of Matt Roth and Sebastian Tran), they were offered to have their shares switched over to lightower shares. I don’t see it as being any good because its a swtich from one private company to another OR they were offered the option of a cash out of their current stocks minus taxes. This is a really raw deal for those 15+ employees that worked 80+ hours a week for 5+ years to make the company what it is, as this company has actually been sold twice already.
A sale of a company such as Veroxity to a competitor for stock is unusual (I would have expected an asset deal) but I would say a stock deal between two private companies where employees were given the option to cash out is even rarer. Why is that not any good for the employees Tooclosetosay? It would be typical that any seller of stock to pay taxes on the sale. Was the valuation too low?
First of all, it was a 60/40 sale, so that is why Veroxity is technically “acquired”. The valuation is not even worth mentioning if that gives you any indication. With employees having their pay slashed 20-30% for the past 2.5 years since Banc of America aquired and all employees being stripped of many perks that they had when they were veroxity (for example 100% insurance) and original veroxity employees no longer being gifted shares…I would have to say that it is not a good deal. Worse is all new employees that were hired after the Bank of America acquisition who were previous employees of the defunct Neon are running Veroxity presently and upon hiring were offered more shares than what an original employee accumulated over 5 years. That burns. I digress and I didn’t even mention the coup de grace.
Tooclosetosay: That 60/40 split is not consistent with the petitions that the two companies filed before the various states public utility commissions for regulatory approval. Check out the pdf filing under NY DPS matter number 10-01186 (see link):
http://documents.dps.state.ny.us/public/MatterManagement/CaseMaster.aspx?MatterSeq=34230
According to the filing, 100 percent or all of Veroxity equity/ stock will be acquired by Lightower in exchange for a 14.3 ownership of Lightower. That does not sound like a 60/40 split but more like a 86/14 percent split. Were the employees told something different?
Based on the public filings I am guessing the valuation of Veroxity was $50M to $60M compared to a $400M to $450M valuation on Lightower. Based on a guess of roughly $50M of Lightower EBITDA (combination of Neescom, Keyspan, Hudson Valley Data Net and sale of tower business to SBA Communications) that would put the EBITDA multiple on the Veroxity purchase around 8 to 8.5 times.
Also, with their filings, they disclose a $9 million increase of a credit agreement ($55M up to $64M). I would expect the deal and integration costs to be less than a million bucks so some people may be getting a cash out. Maybe the Veroxity board or management?
Lets place our wagers on who buys Nstar? I think the defunct Neon management team that was running Veroxity all goes back to RCN Metro and buys Nstar with Abry Partner’s money.
We were told it was a 1) 60/40 split, 2) Veroxity has valutation of $50M and lighttower with $150M, 4) that lighttower was not planning to go public in the next 5 years.
Thanks for digging up the public documents. Its very interesting.