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Zayo Rejects Buyout Offer PDF Print E-mail
Wednesday, 20 February 2019 09:12

A Bill Ackman protégé is angling to fight Zayo Group Holdings after the company rejected a $6 billion-plus offer in the last few days from the Blackstone Group, according to sources.

Former Pershing Square investor Scott Ferguson, chief of Sachem Head Capital Management, which he launched in 2014, has written recent letters to Zayo CEO Dan Caruso urging him to sell the company, three sources said.

Boulder, Colo.-based Zayo makes communications infrastructure, with networks throughout the US and Europe.

Blackstone made a binding offer in the last few days for Zayo at around $30 a share, after conducting due diligence, sources said.

The new offer is a bit lower than the non-binding offer Blackstone made weeks before.

Zayo has indicated it is rejecting the offer, sources said. Bloomberg reported that Zayo has been attracting suitors and takeover interest from private equity funds and investment firms.

Typically, Zayo finds itself on the buy-side of the negotiation table. The company has acquired more than 40 companies over the course of its 11-year history. Most of those buys were investments in infrastructure to support innovation of delivering web traffic for some of the business world’s largest bandwidth users.

A number of those companies also offered more enterprise-level products, like phone services, lower-speed internet and wide-area networking (WAN) solutions.

Zayo executives have been evaluating growth strategies for a while, including a plan to spin off Zayo into two public companies.

“We think it enables both companies to achieve their growth aspirations more quickly,” Zayo CFO Matt Steinfort told Denver Business Journal in December. “This will create growth from a revenue and sales standpoint.”

Sachem has a reported 2 percent stake in Zayo.

If Sachem launches a proxy fight, it may not be easy. Zayo has a staggered board, with three directors coming up for election in what will likely be a November annual meeting, sources said.

Sachem last had activist success when it pushed the Premier Inn chain to consider selling its Costa coffee chain, which was eventually sold to Coca-Cola.

Blackstone and Sachem declined comment.