GTT offloads infrastructure division for $2.15B to I Squared Capital

After shopping it around for about a year, GTT has reached a $2.15 billion deal to sell off its infrastructure division to I Squared Capital.

I Squared Capital, which is an independent global investment firm, will pay GTT just over $2 billion in cash upon closing along with total deferred payments of up to $130 million based on certain financial results.

The deal is slated to close in the first half of next year once it gains the customary closing approvals. The infrastructure division consists of GTT’s Pan-European, North American, sub-sea and trans-Atlantic fiber network and data center infrastructure assets.

In September, GTT's was reportedly close to reaching a deal worth over $2 billion to Macquarie and 3I Group.

RELATED: GTT hires advisors to explore sale of its infrastructure division

In November of last year, McLean, Virginia-based GTT said it had hired Credit Suisse and Goldman Sachs to act as financial advisors for the possible sale of its infrastructure division. The infrastructure division includes some of the assets GTT acquired in its $2.3 billion to buy Interoute two years ago and assets from its $590 million deal to buy Hibernia Networks in 2016. It also included assets from GTT's acquisition of KPN International, which was a division of Dutch carrier KPN, for $56 million in 2019.

Dating back three years, GTT has closed and integrated more than 10 acquisitions, and about 30 overall. Those deals have nearly quadrupled the size of the company, but along the way GTT has built up long-term debt. In the end, GTT's appetite for deals was bigger than its wallet.

While GTT has taken a chunk out of its debt load, it may not be done selling off assets.

"GTT has been building its services business for some years but it hasn't reached scale as a global services player versus the likes of Verizon Business and Orange Business Services et al," said David Molony, principal Analyst with Omdia. "It might be time to put the network on the block, especially if there is interest from a U.S. carrier like Lumen (formerly CenturyLink), which has high growth aspirations."

Former GTT CEO and President Rick Calder's aggressive acquisitions strategy came back to bite the company as it became saddled with $3.3 billion in debt as of its 2020 first quarter.

In May, GTT announced Calder was leaving effective June 1. On July 6, GTT Chief Revenue Officer Ernie Ortega was named as the interim CEO while its board continues its search for a permanent CEO. 

“The divestment of the highly differentiated infrastructure division assets will ensure greater focus on network investment and development of high-speed infrastructure services under the more specialized ownership of this experienced investor,” Ortega said in a statement. “The deal enables GTT to reinforce its capex light business model as well as its cloud networking focus and will benefit both enterprise and infrastructure clients alike.”

I Squared Capital will become the proud new owner of a 103,000-route kilometer fiber network with more than 400 points of presence across 31 metro areas and interconnects in 103 cities across Europe and North America.

It will also get its hands on 14 Tier 3 data centers and more than 100 colocation facilities along with three trans-Atlantic subsea cables, including GTT Express.

Gautam Bhandari, managing partner at I Squared Capital, said in a statement that it would use the GTT infrastructure asses to expand the reach of its platforms across Asia, Europe and North America.

GTT's shares were up by more than 20% Friday morning after it announced the deal with I Squared Capital.