Zayo’s zesty debut

Contact:  Scott Denne

Despite pricing below its target range, Zayo Group receives a warm reception on Wall Street. The fiber services and colocation vendor was trading up about $22 per share (roughly the midpoint of its proposed range) from its $19 IPO price, giving it an enterprise valuation of $8.09bn (7.2x TTM revenue).

Considering Zayo’s organic growth was just 6% in each of the past two years, that’s a healthy multiple, putting it well ahead of others in the colocation and network services sectors, though the diversity of the company’s business – which includes dark fiber, mobile backhaul networks and colocation – makes a direct peer tough to find. Ironically, the best available comparison for Zayo’s valuation is Zayo itself: in 2012, it took AboveNet private in a $2.2bn deal – the largest of the 32 acquisitions it has made since 2007 – at 4.5x trailing revenue.

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