Zayo pays premium for Latisys to continue datacenter push

Contact: Mark Fontecchio Kelly Morgan

Zayo Group takes its sharpest turn yet toward datacenter and networking services with the $675m acquisition of Latisys. The deal, Zayo’s largest in three years, continues a push into more profitable lines of business, a theme that’s dominated nearly all of its last 17 purchases dating back to 2012.

Zayo has traditionally been known as a broadband services provider, and about half of its revenue still comes from that segment. But that percentage has dropped considerably in the past year, as Zayo has used M&A to increase its presence in physical infrastructure services such as colo and raw fiber, which generate 47% of its revenue but 53% of its profit.

Latisys, with datacenters in the US and London, is fetching a high premium from Zayo. Two of Zayo’s colo deals last year – Neo Telecoms and Colo Facilities Atlanta – fetched about 10x and 3x EBITDA, respectively. This one is for about 15x EBITDA, a premium due to Latisys’ ability to both fill gaps in Zayo’s US portfolio and get it a foothold in Europe.

Look for a more detailed report on Zayo’s pickup of Latisys in tomorrow’s 451 Market Insight.

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