Contact: Thejeswi Venkatesh
Zayo Group announced the acquisition of fiber network provider AboveNet on Monday, a move that should help the serial buyer expand its fiber footprint geographically. The bid of $84 per share, which values AboveNet at $2.2bn, represents the highest trading price in the company’s history. There was one shareholder that was particularly pleased with the long-mooted sale of the fiber operator: Franklin Mutual Advisers (FMA), which roughly tripled its investment return in AboveNet.
FMA, an operating subsidiary of Franklin Templeton Investments, bought a 21.6% stake in AboveNet for $128m when the company emerged from bankruptcy in 2003. Zayo’s acquisition values FMA’s current stake of 17.6% at $387m, representing a compound annual rate of return in excess of 14% (including the $5-per-share dividend in 2010). That’s a healthy return at a time when equity risk premiums are hovering at about 6%.