Lumos ends fiber spinout plans, sells to private equity firm EQT Infrastructure for $950M

Private equity company EQT Infrastructure announced it will purchase Lumos Networks in a deal valued at $950 million. The transaction is essentially the end result of Lumos’ months-long efforts to sell itself, and also represents the end of the company’s previous plan to spin out its fiber business.

Importantly, the transaction positions EQT to potentially grow Lumos’ existing fiber business.

“We look forward to working collaboratively with Lumos Networks’ team and to drawing upon EQT’s deep expertise in the telecommunications and fiber sector in support of the company’s growth and expansion,” said Jan Vesely, director at investment advisor EQT Partners, in a release from the company announcing the transaction.

Lumos operates in roughly 24 markets across Virginia, Pennsylvania, West Virginia, Maryland, Ohio and Kentucky. The company owns 9,204 fiber route miles that generate around $114 million in revenues annually.

BTIG analyst Walter Piecyk noted (reg. req.) the company’s sale to EQT essentially values Lumos’ fiber holdings at $77,000 per route mile, which he said compares similarly to Crown Castle’s recent fiber acquisitions of Sunesys and FiberNet “at $100,000 and $130,000 per fiber route mile, respectively, but those are in large metro markets.”

Lumos announced in November it would work to become a pure-play fiber provider by spinning out its fiber business. As part of that effort, the company said it had hired UBS Investment Bank to help it search for a possible buyer for the company's regulated Local Exchange Carrier (LEC) assets. But EQT’s acquisition of Lumos, of both its fiber and its LEC assets, ends that effort.

And EQT’s acquisition of Lumos is just the latest in a long line of recent fiber-based merger and acquisition action. In just the past few weeks, Verizon closed its purchase of XO Communications, CenturyLink’s Level 3 acquisition received approvals from Ohio and Utah state regulators, and Windstream and EarthLink scored their own regulatory approvals for their proposed merger.

Accordingly, analysts expressed little surprise that EQT snapped up Lumos prior to the completion of its planned spinoff.

“While the company has completed two bolt-on fiber/data center acquisitions recently, our sense is that it was unable to find a large/transformational deal at a price that it could afford while at the same time it remained uncomfortable spinning out its legacy business ahead of such a large/transformational deal out of concerns regarding what would be its sub-scale size,” wrote the Wall Street analysts at Cowen and Company in a research note issued this morning. “Ultimately then, an outright sale was the most logical outcome, and perhaps even more so being bought by a PE (private equity) company.”

Lumos late last year acquired DC74 Data Centers for $28.5 million and Clarity Communications for $10 million. The company is the nation’s 12th largest wireline provider with roughly 8,307 FTTH subscribers.