Lumos has acquired Charlotte, North Carolina-based DC74 Data Centers for $23.5 million to $28.5 million in cash, a deal aiming to enhance the service provider’s data center holdings and data services revenue potential.
The price of the acquisition implies a multiple of eight to 10 times the company's adjusted EBITDA in 2016.
Similar to Lumos, DC74 also targets “large local” businesses like hospitals, state and local government agencies and school districts.
Over 80% of DC74’s revenue comes from co-location, bandwidth and cross-connects with the remainder from managed services and managed hosting at its three data centers.
A key element of this acquisition is scaling Lumos' data center holdings.
By acquiring DC74, Lumos will increase the number of its operated co-location facilities to 10. DC74 has 12 carriers, including the likes of Level 3, Cogent, Zayo and AT&T, interconnecting at its facilities. This makes these three spots where Lumos could potentially attract business customers that have needs in the Charlotte market.
What’s more, the combination of DC74 and Lumos’ recent acquisition of Clarity Communications increases the telco’s annualized data revenue in the North Carolina market to over $10 million.
“Evidence strongly suggests that co-location services drive customer stickiness, wallet share and significant increases in bandwidth usage,” said Tim Biltz, CEO of Lumos, in a release.