Zayo might buy Uniti, Windstream

Zayo Group and others are in discussions to possibly buy Uniti and its primary client Windstream, according to unnamed sources of the Wall Street Journal.

The talks between Zayo and Uniti apparently began in June, at which time the parties were considering a price of $15 a share, or about $3.5 billion for Uniti. But the WSJ’s sources say the talks are currently stalled over price.

The deal involves a complicated nest of investment and private equity companies.

The private company Zayo is owned by the investment firms Digital Bridge and EQT. Zayo went private in 2019 in an $8 billion deal.

A research note from Wells Fargo analyst Eric Luebchow said this morning, “Neither company has commented, but we imagine Digital Bridge might have to come up from a $15 offer price to get a deal done.”

Windstream/Uniti ownership

After its bankruptcy restructuring in September 2020, the private company Windstream is now owned by hedge fund Elliott Management and other former creditors. Elliott also has a stake in Uniti.

Windstream and Uniti used to be combined, but they were split apart before Windstream’s bankruptcy. Now, Windstream makes payments of nearly $700 million per year to Uniti for fiber leases.

RELATED: Windstream shakes free from Chapter 11 bankruptcy

According to the WSJ, Zayo’s owners think it would be best to bring Uniti and Windstream back together. That way, Windstream wouldn’t have to make the huge yearly lease payments to Uniti. And the combined company could focus more on the build-out of broadband. 

Fiber build-outs could potentially get a huge boost from the federal government if congress passes its infrastructure bill. Companies are preparing for a boom in broadband deployments.

RELATED: Windstream wants 1,000 new workers to fuel fiber build

Wells Fargo’s Luebchow said, “Zayo is perhaps best positioned of any private player to take Uniti private and combine it with Windstream, in our view. Zayo is the largest private fiber company in the U.S. and could extract substantial cost synergies from combining its network with Uniti's and Windstream's.”

RELATED: Zayo plans to 'get more active' selling lit fiber to 35,000 buildings

Zayo has a relatively new CEO, Steve Smith, who’s been with the company since October 2020. Smith said in August that he wants to grow the company. Zayo has about 126,000 miles of fiber, both dark fiber as well as lit fiber, running to thousands of buildings and data centers in North America and Europe.

Recently, Zayo announced the final phase of construction on three new 100% underground, high-capacity, long haul, dark fiber routes connecting key markets across the country. The three new routes cover Atlanta, Georgia to Dallas, Texas; Denver, Colorado to Salt Lake City, Utah; and Eugene to Reedsport, Oregon.