Lightower snaps up Fibertech in $1.9B all cash deal

Lightower Fiber Networks snapped up Fibertech Networks in a  $1.9 billion all-cash deal that will create a fiber powerhouse in the Northeast, Mid-Atlantic and Midwest regions of the United States.

Funded through a combination of equity and debt, Lightower's existing financial backers, Berkshire Partners, Pamlico Capital and ABRY Partners, will each provide additional equity to fund the deal.

Rob Shanahan, CEO of Lightower will remain CEO of the combined company. The deal is expected to close in the third quarter.

The deal will expand Lightower's network giving the company the ability to offer business and wholesale customers access to more than 30,000 route miles of fiber and nearly 5,000 wireless towers. In addition, the acquisition will give Lightower almost 13,000 on-net service locations, including commercial buildings, data centers, financial exchanges, content hubs and other critical communications facilities.

While this acquisition is new, Shanahan told FierceTelecom in an interview that they had their eye on Fibertech for a number of years.

"We've always liked Fibertech and were bidders back when Nautic sold the company in 2010," Shanahan said. "We thought it would be a good fit and had a lot of respect for what they did and their management team so when Berkshire acquired us two years ago one of the things we had on our radar screen was how to combine with Fibertech."

Shanahan said the company also plans to upgrade and expand the existing network.

By acquiring Fibertech, Lightower will immediately gain a greater presence in the Midwest, including markets such as Detroit, Indianapolis, Cleveland, Cincinnati and Columbus.

Prior to being acquired by Lightower, Fibertech had been in the midst of expanding its fiber network in Detroit and throughout Ohio.  

"Both companies have been aggressive in growing their networks," Shanahan said. "We just completed that large build in Southern Virginia and Chicago complete and they're just about to complete a significant build in Detroit and in 2013 and 2014, they did quite a bit in Ohio."

Shanahan added that "Fibertech has a smaller network in North Carolina and Kentucky so I think increasing density in those markets probably makes sense."

Jennifer M. Fritzsche, senior analyst for Wells Fargo, wrote in a research note that while the acquisition won't make it as large as its Tier 1 competitors, it will make it a more formidable competitor against Level 3 Communications.

"This announcement continues the trend of consolidation in the fiber space and creates a more formidable competitor with companies such as LVLT, in our view," Fritzsche wrote. "While Lightower will not have nearly the geographic reach or long-haul capacity of some larger competitors, it will have a strong metro fiber network, with nearly 13K high-margin on-net locations."

There has been a lot of consolidation in the competitive service provider market in recent years. Fibertech, which was owned by Court Square Partners, had long been rumored to be an acquisition target as it continued to expand its fiber reach into new areas like Connecticut and Ohio.

Lightower has also been aggressively acquiring fiber assets. Besides snapping up a number of smaller providers like Veroxity and ColocationZone, the service provider made its largest deal in 2013 when it purchased Sidera for $2 billion.

Stopping short of revealing any specific acquisition targets, Shanahan said that they will look at purchasing other smaller regional fiber providers.

"We're always looking, but there really aren't too many left of real material size," Shanahan said. "There are some smaller ones throughout our existing footprint that could be interesting at some point in various place that would be good to roll under our umbrella."

For more:
- see the release

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This article was updated on April 27 with additional information from Lightower.