Zayo Group, LLC announced today that it has completed its
previously announced acquisition of AboveNet, Inc. (NYSE: ABVT), a
national provider of fiber-based Bandwidth Infrastructure services.
The combined company will operate in 45 states in the U.S. and 7
countries in North America and Europe. Its network spans over
61,000 route miles with 4.6 million miles of fiber. The combined
network serves approximately 9,000 buildings including major
datacenters, telecommunications hubs, enterprise buildings and
cellular towers.
"With the addition of AboveNet's talent and assets, Zayo is well
positioned to be the leading provider of Bandwidth Infrastructure
solutions to the largest consumers of bandwidth in the US. With
transatlantic capacity, a deep London metro network and access to
major cities in Europe, we can begin to address customers needs in
key international markets as well," said Dan Caruso, President and
CEO of Zayo Group. "While our opportunity has expanded through this
acquisition, we remain focused on delivering dedicated bandwidth
solutions with the responsiveness and reliability that our
customers have come to expect."
Both companies have followed a disciplined focus on high
bandwidth, fiber-based communications solutions that leverage their
substantial fiber footprints. These services include Dark Fiber,
Wavelengths, SONET, Ethernet and Colocation services. In addition,
AboveNet was a major Internet provider, operating an extensive Tier
1 backbone network across the US, Europe and Japan. Zayo will
expand this network to its major markets in the U.S. to provide
wholesale and enterprise Internet access.
zColo, Zayo's interconnect-focused colocation business unit,
will expand its offerings into legacy AboveNet facilities. As a
result, zColo's total facility count will grow to 20. The new
markets served include Boston, Philadelphia, Washington, D.C.,
Baltimore, Dallas and Seattle and are available to deliver services
effective today.
Since announcing the acquisition on March 19th, Zayo and
AboveNet staff have been working together to develop a
comprehensive integration plan. The plan encompasses physical
network integration, organization plans, and a single set of
processes and IT systems. The new organization has been implemented
as of the day of close. The network interconnection work has been
initiated and is expected to be mostly complete in three months. A
single set of products has been established. Conversion to Zayo's
order to cash systems have begun with initial phases expected to be
completed by late August with the remaining components completed by
the end of the year.
"'Zayo's extensive experience in integration through its 19
previous acquisitions will help us quickly integrate the network
and operations of AboveNet into a single platform. I am confident
customers will see little disruption and will seamlessly have
access to the assets and services of both companies," said Dan
Caruso, President and CEO of Zayo Group.
The combined company has pro forma revenue of $925M and $527M of
Adjusted EBITDA based on annualizing each company's March quarterly
results plus previously announced synergies of $77 million.
About Zayo Based in Louisville, Colo.,
privately owned Zayo Group (www.zayo.com) is an international
provider of fiber-based bandwidth infrastructure and
network-neutral colocation and interconnection services. Zayo
serves wireline and wireless carriers, data centers, internet
content and services companies, high bandwidth enterprises as well
as federal, state and local government agencies. Zayo provides
these services over regional, metro, national, international, and
fiber-to-the-tower networks. Zayo's network assets include over
61,000 route miles, covering 45 states plus Washington, D.C. as
well as London, Paris, Amsterdam, Frankfurt, Toronto and Tokyo.
Additionally, Zayo has approximately 9,000 buildings and 2,400 cell
towers on-net, and over 136,000 square feet of billable colocation
space. On June 5, 2012 Zayo announced its agreement to acquire
FiberGate, a Dark Fiber provider in the Washington, D.C. area which
is expected to close during the third quarter of 2012.
Forward Looking Statements Information
contained in this press release, in SEC filings by the Company, and
in presentations by the Company or its management that are not
historical by nature constitute "forward-looking statements" which
can be identified by the use of forward-looking terminology such as
"believes," "expects," "plans," "intends," "estimates," "projects,"
"could," "may," "will," "should," or "anticipates" or the negatives
thereof, other variations thereon or comparable terminology, or by
discussions of strategy. No assurance can be given that future
results expressed or implied by the forward-looking statements will
be achieved and actual results may differ materially from those
contemplated by the forward-looking statements. Such statements are
based on management's current expectations and beliefs and are
subject to a number of risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by the forward-looking statements. These risks and uncertainties
include, but are not limited to, those relating to the Company's
financial and operating prospects, current economic trends, future
opportunities, ability to retain existing customers and attract new
ones, the Company's acquisition strategy and ability to integrate
acquired companies and assets, outlook of customers and strength of
competition and pricing. Other factors and risks that may affect
the Company's business and future financial results are detailed in
the Company's SEC filings, including, but not limited to, those
described under "Risk 7 Factors" within the Company's Annual Report
on Form 10-K. The Company cautions you not to place undue reliance
on these forward-looking statements, which speak only as of their
respective dates. The Company undertakes no obligation to publicly
update or revise forward-looking statements to reflect events or
circumstances after the date of this press release or to reflect
the occurrence of unanticipated events, except as required by
law.
Non-GAAP Financial Measures The Company
provides financial measures that are not defined under generally
accepted accounting principles in the United States, or GAAP,
including earnings before interest, taxes, depreciation and
amortization ("EBITDA") and Adjusted EBITDA. EBITDA and Adjusted
EBITDA are not measurements of our financial performance under GAAP
and should not be considered in isolation or as alternatives to net
income or any other performance measures derived in accordance with
GAAP or as alternatives to cash flows from operating activities as
measures of our liquidity.
"Adjusted EBITDA" is defined as EBITDA from continuing
operations adjusted to exclude transaction costs related to
acquisitions, stock-based compensation, and certain non-cash items.
Management uses Adjusted EBITDA to evaluate operating performance
and liquidity and this financial measure is among the primary
measures used by management for planning and forecasting of future
periods. The Company believes Adjusted EBITDA is especially
important in a capital-intensive industry such as
telecommunications. The Company further believes that the
presentation of Adjusted EBITDA is relevant and useful for
investors because it allows investors to view results in a manner
similar to the method used by management and makes it easier to
compare our results with the results of other companies that have
different financing and capital structures.
Adjusted EBITDA has limitations as an analytical tool, and
should not be considered in isolation from, or as a substitute for,
analysis of our results as reported under GAAP. For example,
Adjusted EBITDA:
- does not reflect capital expenditures, or future requirements
for capital and major maintenance expenditures or contractual
commitments;
- does not reflect changes in, or cash requirements for, our
working capital needs;
- does not reflect the significant interest expense, or the cash
requirements necessary to service the interest and principal
payments on our debt; and
- does not reflect cash required to pay income taxes
The Company's computation of Adjusted EBITDA may not be
comparable to other similarly titled measures computed by other
companies, because all companies do not calculate Adjusted EBITDA
in the same fashion. Because the Company has acquired numerous
entities since inception and incurred transaction costs in
connection with each acquisition, has borrowed money in order to
finance operations, has used capital and intangible assets in the
business, and because the payment of income taxes is necessary if
taxable income is generated, any measure that excludes these items
has material limitations. As a result of these limitations,
Adjusted EBITDA should not be considered as a measure of
discretionary cash available to invest in the growth of the
business or as a measure of liquidity.
A reconciliation from earnings from continuing operations during
the three months ended March 31, 2012 to annualized Adjusted EBITDA
for Zayo and AboveNet is as follows:
Zayo Group, LLC
Pro Forma Statement of Operations
For the Three Months Ended March 31, 2012
(Unaudited)
AboveNet, Pro Forma Zayo Group
Zayo AboveNet, Inc. Adjustments Pro-forma
Group, LLC Inc. Pro Forma for Debt as
Historical Historical Adjustments Offerings adjusted
---------- ---------- ----------- ----------- ----------
(in thousands)
Net earnings/
(loss) $ (2,652) $ 18,355 $ (5,888) $ (27,584) $ (17,769)
Add back non-EBITDA
items included in net
earnings/(loss):
Depreciation and
amortization 23,798 20,703 9,020 - 53,521
Interest
expense, net 14,450 1,085 (141) 45,219 60,613
Provision/(benefit)
for income taxes 11,166 12,414 (3,764) (17,635) 2,181
Transaction costs 1,554 - - - 1,554
Stock-based
compensation 5,624 6,700 - - 12,324
---------- ---------- ----------- ----------- ----------
Adjusted EBITDA $ 53,940 $ 59,257 $ (773) $ - $ 112,424
========== ========== =========== =========== ==========
Annualized (March 31, 2012 pro forma Adjusted
EBITDA multiplied by 4) $ 449,696
Expected synergies $ 77,000
Pro forma Adjusted EBITDA, with
estimated synergies $ 526,696
Note: The preceding unaudited pro forma
financial information has been prepared giving effect to (i) the
AboveNet acquisition, (ii) the offering of $1.25 billion in Senior
Notes, and (iii) the entrance into a $1.62 billion Term Loan
facility as if each event occurred on January 1, 2012. The pro
forma adjustments reflect the Company's preliminary estimates of
the impact to the Company's statement of operations resulting from
purchase accounting adjustment. The estimated purchase accounting
adjustments arise from adjusting the value of the net assets
acquired to their acquisition date fair values. The determination
of the fair values of the acquired assets and assumed liabilities
(and the related determination of estimated lives of depreciable
tangible and identifiable intangible assets) requires significant
judgment. The Company has not completed its valuation analysis and
calculations in sufficient detail necessary to arrive at the final
estimates of the fair value of the acquired assets and liabilities
along with the related impact such adjustments will have on the
Company's statement of operations.
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