Yesterday Zayo moved the Analyst Day it had planned for next Thursday onto the back burner. They have postponed the event ‘to allow time to explore’ strategic alternatives that may enhance shareholder value. The stock surged in response.
While we already knew that the company has been in the M&A cross-hairs, this was a fresh new data point that suggests a deal may indeed be near. The phrasing of the quote from Dan Caruso seems to hint at one likely result:
“Zayo’s purpose is to provide mission-critical bandwidth to the world’s most impactful companies. We accomplish this by executing a focused strategy centered on communications infrastructure. With our deep and expansive fiber networks in North America and Europe, we play a unique and compelling role at the core of our customers’ networks. Whether public or private, this will remain Zayo’s focus and we will continue to expand the depth and breadth of our fiber infrastructure.”
“Whether public or private” suggests the two main possibilities of deal or no deal, leaving less room for (but not ruling out a purchase by a strategic buyer. It has always seemed most likely to me that Zayo might simply like to be privately held again if the right opportunity were to come along.
While an earlier offer by a consortium led by Blackstone was apparently rejected, I don’t think anyone thought negotiations had concluded. So there isn’t really much news here, and they may simply have postponed the analyst day in recognition that the street isn’t looking for the kind of information they were planning to present anyway. But it does feel more likely that a deal is getting closer, doesn’t it?
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Categories: Fiber Networks · Mergers and Acquisitions
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What do you think the disconnect is between the valuation of a company like ZAYO as compared to a CTL(LVLT)?
CTL is a s**t show and their integrations have been a mess. They have a lot of old fibre that won’t support the latest Wave gear and their support processes and install quality is shoddy. Xayo own a lot of unique routes and their pricing is aggressive.
Could not agree more with the CTL comments.
This isn’t true. CTL (Level 3) has far more of the latest / best fiber over most of the important LH and metro routes. The disparity in value comes primarily from the overhang of a massive slowly dying residential and rural business. Both are hugely profitable but shrinking every year.
CTLs best infrastructure is far more extensive and desirable than what Zayo has. They (CTL) also have a real enterprise business, product portfolio and sales force whereas what Zayo has is small, undifferentiated and a bit of a mess. There is a better business inside both. To get at that in Zayo you need a competent management team with experience and focus on enterprise. (They have tried for many years and failed to generate sustainable organic growth that justifies their value, hence the recent sell off, added to that the boneheaded “value creation plan”.) For CTL, well, it’s far more complicated since the resi business is essentially impossible to separate and it drowns any success on the enterprise side. They have a decent management team in spots but also show some serious bad judgement with how the dividend cut was delivered. Investors have lost confidence in both, both need a catalyst. For Zayo it is new ownership and management. For CTL, time will tell but nothing is on the horizon. It’s a shame because the industry needs them to be better.
Concerned Shareholder cant even spell Zayo let alone understand the reality of the infrastructure each carrier physically owns and operates. You will actually find that following CTL s acquisition of Level 3 they have the highest capacity, most-peering fibre based infrastructure in the world. Stick to Shares and Stocks, you know F@CK all about infrastructure 😉
CTL has incredible assets. And you’re right, it’s running the company is an incredibly complex job. Unfortunately, CTL isn’t up to that job — they’re the Peter Principle of companies, growing more quickly than their competence can handle. They’re failing, and that’s why.
Any CTL shareholder who isn’t a “concerned” shareholder is a stupid shareholder: https://finance.yahoo.com/quote/CTL/
I think i/we often mistake great assets for a good business. Telecom and related services are about cash-flow, not charging (like a museum) to look at great assets (art). LVLT made a company out of collecting great assets that weren’t sufficiently cash productive (e.g., GBLX, WilTel, ICG, et al). They did so with amazing capital management (and industry’s leading CFO). Now that all of these networks are folded into a weak RBOC/LEC, and Sunit has left the building, there aren’t any more cost of capital arbs/opportunities left to play. So management is back to: Can these assets generate *sustainable and growing* cash flows. If not, the equity isn’t a buy at any price because the debt will be paid off first in a sale, LBO or liquidation
CTLs sales force and Peter principal management has reached the end of their rope. They have so much complexity at scale that there is no way to outgrow the declining IR and consumer revenue problems. Doesn’t matter how good or how deep the assets are when you are losing 4 pct of revenue out of the bottom from consumer which L3 never had before. Add standard enterprise telco price compression and even the best of bilge pumps won’t keep that ship upright. Some of you have heard the stories of larg customers reps not knowing what networks their customer are using due to the revolving door of sales and mgmt flunkies. Honestly these stories are even worse than the MCI WCOOm stories from 2002. I don’t think the employees or the shareholders have seen the worst of it yet. Reading this thread is hilarious, do you all know that L3 now owns all of CTL? It was poorly run before L3. The only remnants of the Qwest and CTL of 2017 is the CWA. It’s like putting my 10 year old at the helm of that sinking ship.
Zayo on the other hand could be fixed in 18 months by a talented mgmt team. No comparison to CTL, they are in better shape just by being smaller. PE should step up or even CCI.
Can’t see that happening without a big internal battel for control first.