Zayo Group Holdings has closed its acquisition of Allstream, a wholly owned subsidiary of Manitoba Telecom Services Inc., for a purchase price of CAD $465 million. The acquisition establishes Zayo as the only Pan-U.S./Canada fibre network provider, and adds five dense metro networks to Zayo’s portfolio.
The acquisition adds more than 18,000 route miles to Zayo’s fibre network, including 12,500 miles of long-haul fibre connecting all major Canadian markets and 5,500 route miles of metro fibre network connecting approximately 3,300 on-net buildings concentrated in Canada’s top five metropolitan markets. Zayo’s global Communications Infrastructure now encompasses 110,000 route miles of high-capacity fibre, 53 data centres and connectivity to approximately 350 markets across North America and Europe. Existing and new customers have immediate access to this expansive, high-performance infrastructure.
Zayo will reorganise the Allstream business and assets into two business units. The first, Zayo Canada, will own and operate the Canadian fibre and data centre assets and its products and customers will align with those of Zayo. Zayo Canada will represent approximately half of Allstream’s CAD $600 million revenue base. The second business unit will include Allstream’s voice, unified communications and small enterprise businesses and will retain the Allstream brand.
“Our goal is to unlock the potential of Allstream’s assets to generate value for customers and shareholders,” said Dan Caruso, chairman and CEO of Zayo. “The new structure will enable both business units to better focus on their customers in order to grow and innovate.”
Zayo has selected Michael Strople, president of Allstream, to serve as managing director over both the Canadian business units. He will report to Karl Maier, president of Zayo International. They will lead the initiative to restructure into two business units, with each business unit focused on providing a great overall experience for customers and strong value creation for investors.
Zayo Canada aspires to a high single-digit growth rate with a > 40% adjusted EBITDA margin, with an emphasis on executing Zayo’s Communications Infrastructure business model. The overall purchase price reflects a pre-synergised adjusted EBITDA multiple of less than five times.
