The Zayo Group today announced it is acquiring Allstream, a Canadian bandwidth and telecom services provider, for $348 million.
In addition to adding Allstream’s about $449 million in annual revenue, Zayo will also get access to the Allstream’s metro and long-haul fiber networks and the company’s colocation business.
Allstream has a 5,592 route miles of metro fiber network—concentrated in Toronto, Montreal, Vancouver, Ottawa, and Calgary—that connects to about 3,300 buildings. The company also has an approximate 12,427 route mile long-haul fiber network connecting all major Canadian markets and 10 U.S. network access points.
Allstream also runs colocation space in Toronto, Montreal, and Vancouver.
Zayo estimates that half of Allstream’s revenue will slot right in along with Zayo’s core business. Zayo will separate this business from other parts of Allstream, and integrate it into Zayo, similar to what the company did for Zayo UK and Zayo France.
Turning Allstream’s communication infrastructure business into Zayo Canada will take multiple quarters to complete.
“As we stand up Zayo Canada, we are targeting [about $225 million] of revenue, a >40 percent EBITDA margin, and a high single digit growth rate,” Zayo International president Karl Maier said in a statement. “If we achieve this outcome and apply an EBITDA multiple similar to Zayo, the value of Zayo Canada will be substantial.”
The other half of Allstream’s business will be organized into two additional segments: Voice and Universal Communications and Small Business, both of which will be separated into standalone business units.
“We believe these other businesses provide valuable and important services to their customers, and the business unit focus will enable them to grow and innovate,” Zayo CEO Dan Caruso said in a statement. “We’ve successfully done this on prior acquisitions. The key is strong and focused leadership, appropriate management incentives, and stand-alone financial statements that allow transparency into performance.”
Zayo’s Allstream deal comes less than two weeks after Zayo announced it is buying Viatel, a wholly owned subsidiary of Dublin-based managed services operator Digiweb Group, for about $102 million.
The Viatel deal will give Zayo, a bandwidth and connectivity provider, access to a 5,220 mile fiber network across eight countries. Zayo will get 12 new metro networks, seven data centers and connectivity to 81 on-net buildings, along with two wholly-owned subsea cable systems connecting routes between London and Amsterdam, and London and Paris.