Zayo Group Holdings, Inc. has announced it has entered into a definitive agreement to acquire Spread Networks for $127 million in cash. Spread Networks is a privately-owned telecommunications provider that owns and operates a 825-mile, high-fiber count long haul route connecting New York and Chicago.
The acquisition will provide Zayo’s customers with the lowest latency and most direct fiber route between the two cities and additional physical path diversity. This path is particularly important to financial services customers who have trading operations in the key financial markets of New York and Chicago. When combined with Zayo’s fiber routes from Seattle to Chicago and San Francisco to Chicago, many other verticals including content, media and cloud providers benefit from the low-latency, coast-to-coast network. Traffic to and from Asia, which connects through cable landing stations in the Pacific Northwest, are also express connected via the combination of Zayo existing fiber routes and the Spread route.
The high-fiber count route, which currently serves more than 60 customers, has ample capacity for new customers. Of the 432 fibers available on the route, less than 25 percent are utilized today and the acquisition provides Zayo with overpull rights and additional conduit. The route connects 755 Secaucus Rd. in Secaucus, NJ and 1400 Federal Blvd. in Carteret, NJ to 350 Cermak Rd. in Chicago, IL, with additional connectivity enabled by Zayo’s existing network. Zayo will use the acquired assets to provide a low-latency wavelength route from Seattle to New York.
“Spread constructed this route to provide the fastest possible speed on the shortest possible route,” said Jack Waters, CTO and president of Fiber Solutions, Zayo. “This asset is an outstanding complement to our existing network, providing customers with low-latency options to and from the country’s leading centers of finance and commerce. Given the relative simplicity of the business, this will be a straightforward integration with meaningful, near-term synergies.”
The all-cash transaction is expected to be funded with cash on hand and debt and is expected to close in the first calendar quarter of 2018, subject to customary closing conditions. For the quarter ending December 31, 2017, Spread Networks is expected to generate $22.8 million in annualized revenue and $7.5 million in annualized EBITDA. Zayo expects to reach $10.5 million in annualized EBITDA from the Spread acquisition by the September 30, 2018 quarter through cost synergies and organic growth.