October 17, 2014
Colorado telecom Zayo Group Holdings is now a public, $5 billion company, thanks to a massive IPO the Boulder-based company pulled off on Friday morning.
Zayo (NYSE: ZAYO) initially priced the deal below its expectations—it sold shares to investors at $19 apiece, well below the range of $21 to $24 the company projected last week. But by mid-morning, after debuting on the New York Stock Exchange, the company’s shares had jumped about 16 percent. They were trading around $22 per share, giving the company a market capitalization of more than $5 billion as of 12:30 MT.
The net value of the initial public offering for the company and its investors was $400 million, according to an SEC filing. They sold a combined 21.05 million shares.
Zayo sold just more than 16 million shares; existing investors sold an additional 5 million. The roughly 21.05 million combined shares at $19 apiece adds up to around $400 million in gross proceeds. After subtracting discounts due to underwriters and other expenses, the company expects to haul in approximately $281.8 million, the filing said. That number could increase, however, if Zayo’s underwriters exercise an option to buy another 3 million shares.
The company and its investors originally planned to sell 28.9 million shares total when it proposed a price range on Oct. 6. Zayo aimed to sell 11.1 million shares, while investors planned to sell 17.8 million. At the projected midpoint of $22.50 per share, they would have raised a total of $650 million.
Zayo has lost money since its founding in 2007, and those losses have grown significantly in the past couple of years as the company spent heavily on infrastructure and corporate acquisitions. Over its history, Zayo has shelled out nearly $4 billion to buy 32 companies.
In its most recent fiscal year, which ended June 30, Zayo booked $1.12 billion in revenue, but suffered a $179 million net loss. Its debts totaled $3.3 billion at that point.
Zayo said in its IPO prospectus it expects the losses to continue for several years.
Like many telecom infrastructure providers, Zayo hopes to make a return on its heavy up-front investments by collecting service fees for many years from companies that need to access its network. Wireless providers, finance firms, Internet companies, healthcare establishments, and government agencies are major parts of Zayo’s client portfolio.
Zayo’s growth was the result of an aggressive strategy that often targeted struggling telecom providers such as 360networks, which Zayo bought in 2011 for $317.9 million. Zayo’s largest acquisition was AboveNet, which it bought in 2012 for $2.21 billion.
The acquisitions along with Zayo’s own construction have created an 81,000-route mile network that reaches nearly than 320 markets in the U.S. and Europe. There are 37 datacenters and more than 15,000 buildings on Zayo’s network.
Zayo executives were not available for interviews Friday morning. CEO Dan Caruso had this to say in a statement:
“We are excited to begin this next chapter in the history of Zayo, and this significant milestone can be attributed to our company’s hard-working leaders and employees. As a public company, Zayo Group will continue to focus on a simple mission—to deliver the bandwidth infrastructure needed to power our modern, connected world.”