NEW YORK ( TheStreet) -- Privately held Web infrastructure and networking services company Zayo Group is buying AboveNet (ABVT) for $2.2. billion or $84 a share in cash in a push to bolster the company's fiber optic network in North America and Europe.
The deal, which comes at a 13% premium to AboveNet's Friday closing price of $74.25 will help the company serve increasing data demands by businesses, Web carriers, schools, hospitals and government, according to a press release.
"The combination of AboveNet's and Zayo's assets creates a dense fiber footprint throughout North America and Europe for a bandwidth hungry world," Bill LaPerch, AboveNet's chief executive, said in a statement. "This new company will be uniquely qualified to meet the expanding needs of enterprise and carrier customers."
To pay for the cash offer, Zayo has arranged for lending from its financial advisers Barclays Capital (BCS) and Morgan Stanley (MS). In addition, the Louisville, Co.-based company will take an equity capital investment from private equity fund GTCR and a long-time investor Charlesbank Capital Partners.For Zayo, those capital commitments will help it pay for the cash offer. The company currently only holds $25.9 million in share and short term investments and is given a junk credit rating of B2 by Moody's. Overall, the company has $682.7 million in long-term debt. In pre-market trading on Monday, AboveNet shares rose over 13% to $84.50, slightly above the offer price and a record high for the company's shares since a 2009 initial public offering. The deal is Subject to a 30 day "go shop" period, where the company can take higher competitor bids.
AboveNet operates metro networks totaling 9,000 route miles and a fiber network of about 13,000 miles. That service capacity will be added to Zayo's 45,000-route-mile network in 42 states and the District of Columbia. In 2011, the company earned a profit of $72.7 million or revenue of $472.5 million. That profit figure was a rise from $69 million in 2010 revenue, but a drop from the company's 2009 net income of $281 million. Written by Antoine Gara in New York.