Zayo Group to Split into Two Companies: InfraCo and EnterpriseCo
by Josh Anderson
BOULDER, CO — Zayo Group Holdings will separate its business structure into two publicly traded companies. One will provide core communications infrastructure, while the other will leverage infrastructure to provide solutions for a broad set of enterprise customers.
- InfraCo will be a unique, fiber-focused infrastructure provider with deep, dense networks and broad geographic reach throughout North America and Western Europe.
- EnterpriseCo will have a strong product portfolio and customer base centered on higher bandwidth connectivity to enterprise locations, including to public cloud and SaaS providers, that will be sold both directly to enterprise customers and wholesale through a carrier focused channel.
“Today’s announcement is the logical next step in the evolution of Zayo,” said Dan Caruso, Chairman and Chief Executive Officer of Zayo in the official press release. “While Zayo’s business today is organized as five autonomous segments, the complexities of these businesses have made it more difficult to achieve our growth objectives. By completely separating the infrastructure and enterprise businesses, we will enable more focused execution within each business, leading to enhanced growth and unlocking value.”
InfraCo will be comprised of the current Fiber Solutions and zColo business segments, along with the Wavelength and IP Transit businesses of Zayo’s current Transport segment. InfraCo will boast an international fiber footprint and unparalleled metro and regional density. This business will own and operate Zayo’s Tier One IP backbone as well as the Media Networks platform that serves its strategic video customers.
InfraCo will benefit from strong secular demand and will cater to a base of the largest and most sophisticated users of bandwidth infrastructure. InfraCo will continue to be led by Dan Caruso, current Chairman and Chief Executive Officer of Zayo.
EnterpriseCo will be comprised of the current Enterprise Networks and Allstream segments, along with the SONET and Ethernet businesses of Zayo’s current Transport segment. EnterpriseCo will have significant scale and breadth of product portfolio, while a long-term relationship with InfraCo will provide certainty on network access and cost. EnterpriseCo will consist of two business units, an Enterprise Division and a Carrier Division.
- The Enterprise Division will focus on the direct-to-enterprise business and will include solutions centered on SD-WAN, IP VPN, and Unified Communications. This division will provide high-bandwidth solutions to a large, well-diversified customer base that includes over 50,000 enterprises.
- The Carrier Division will focus on wholesale services to carriers which enable them serve their enterprise customers, including Carrier Ethernet tails, Wholesale Voice, and SONET. These two business units, which will each combine resources and staff from both Allstream and Zayo’s existing Enterprise segment, will be run autonomously to ensure full focus on their respective customer base and solutions.
EnterpriseCo will be led by newly named Chief Operating Officer Mike Strople, current president of Zayo’s Allstream Segment, and Tyler Coates, Senior Vice-President of Zayo’s existing Enterprise Segment.
“This transaction positions InfraCo as the largest pure-play fiber-focused communications infrastructure provider and creates an opportunity for EnterpriseCo to fully focus on our extensive enterprise customer base, solution set and business model while maintaining a strategic relationship with InfraCo,” added Caruso, on the benefits of separation. “As we operate independent businesses today, we anticipate the transition to be fairly straightforward.”
The transaction will be consummated via a pro rata taxable spin of EnterpriseCo from Zayo. Zayo’s existing NOLs are expected to be available to reduce any cash taxes owed by Zayo in conjunction with the spin-off. This structure preserves the ability for InfraCo to convert to a real estate investment trust. Consummation of the spin is subject to regulatory and Board approval. The transaction will be completed in late 2019, and Zayo shareholders will own shares of both companies. Goldman Sachs and J.P. Morgan are serving as financial advisors to Zayo.
About Zayo Group: Zayo Group Holdings, Inc. provides communications infrastructure solutions, including fiber and bandwidth connectivity, colocation and cloud infrastructure to the world’s leading businesses. Customers include wireless and wireline carriers, media and content companies and finance, healthcare and other large enterprises. Zayo’s 130,000-mile network in North America and Europe includes extensive metro connectivity to thousands of buildings and data centers.
In addition to high-capacity dark fiber, wavelength, Ethernet and other connectivity solutions, Zayo offers colocation and cloud infrastructure in its carrier-neutral data centers. Zayo provides users with flexible, customized solutions and self-service through Tranzact, an innovative online platform for managing and purchasing bandwidth.