Zayo buys Allstream for $348 mn to boost Canada business

Zayo Group
Zayo Group Holdings has acquired Allstream, a provider of bandwidth and telecom services to business and public sector customers in Canada, for CAD $465 million or $348 million.

Allstream, a company owned by MTS, has posted revenues of approximately CAD $600 million and Adjusted EBITDA (excluding restructuring charges) of approximately CAD $100 million.

Zayo aims to add Allstream’s fiber and colocation assets to its communications infrastructure business. Allstream has over 9,000 route kilometers of metro fiber network concentrated in Toronto, Montreal, Vancouver, Ottawa, and Calgary that connect to approximately 3,300 on-net buildings.

In addition, Allstream has 20,000 route kilometer long-haul fiber network connecting all major Canadian markets and 10 U.S. network access points. Allstream operates colocation space in Toronto, Montreal, and Vancouver.

“We will unleash the full potential of these assets by combining them with Zayo’s network and focus on providing high-quality and low-cost bandwidth to help fuel the growth of Canada’s economy,” said Dan Caruso, chairman and CEO of Zayo.

Zayo will reshuffle the other half of Allstream’s business into two additional segments: Voice and Universal Communications, which has approximately one-third of Allstream’s revenue, and Small Business which primarily focuses on enterprise voice.

“As we stand up Zayo Canada, we are targeting CAD $300 million of revenue, a >40 percent EBITDA margin, and a high single digit growth rate,” said Karl Maier, president of Zayo International.

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